Eamonn Butler

Politicians shouldn’t meddle with energy prices

David Cameron’s announcement in the House of Commons on Wednesday – that he would force energy companies to give people the lowest tariff – caused a stir. The Downing Street comms machine has been trying to clarify the new policy ever since and we’re only just starting to see a clear idea taking shape.

So what are we to make of it? Well, there is almost no competition in the energy market. There are only six big companies, and those are regulated within an inch of their lives. So with no proper competition, you could make the case that government has a role to make sure that customers are properly informed about prices, so that they won’t be cheated. For example, if you buy your energy in advance and online, you could save around £200 off the average household bill of £1,300. But most households, when they sign up with an energy company, find themselves placed on a ‘standard’ tariff and remain unaware that there are cheaper ones.

Making sure that suppliers at least told them the options – and making sure that those options were clear, intelligible and understood – seems a good move in the direction of transparency. It might not be needed if we had proper competition, because eager firms would be delighted to undercut their rivals, but as long as we have such limited competition, this further intervention could be justified. Something like it happened with rail fares, where people were being quoted exorbitant prices. Now customers have to be told what the cheaper options are.

But it is no business of the government to dictate what suppliers should charge, or to make them ensure that their customers pay the minimum amount possible. In the first place, there are large numbers of choices.

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