Energy price cap plans must be introduced urgently to stop millions of loyal and vulnerable customers being ripped off, a powerful committee has told the Government.
The Big Six energy companies have been overcharging for years and have brought plans to limit bills on themselves, MPs said.
After reviewing draft laws, they backed plans for a temporary absolute cap to fix the “broken” energy market.
The Business, Energy and Industrial Strategy (BEIS) Select Committee also criticised regulator Ofgem for failing to use its extensive powers to protect customers, especially the most vulnerable.
Labour MP Rachel Reeves, who chairs the Business, Energy and Industrial Strategy Select Committee (Stefan Rousseau/PA)
Labour’s Rachel Reeves, who chairs the committee, said: “The energy market is broken. Energy is an essential good and yet millions of customers are ripped off for staying loyal to their energy provider.
“An energy price cap is now necessary and the Government must act urgently to ensure it is in place to protect customers next winter.
“The Big Six energy companies might whine and wail about the introduction of a price cap but they’ve been overcharging their customers on default and SVTs (standard variable tariffs) for years and their recent feeble efforts to move consumers off these tariffs has only served to highlight the need for this intervention.”
Business Secretary Greg Clark published draft legislation for an absolute cap on “rip-off” energy tariffs last year.
But he refused to guarantee that the flagship plans would be in place by next winter.
Customers are paying £1.4 billion a year over the odds under the current system and around 12 million are stuck on poor-value tariffs, according to the report.
The committee said there was a “clear lack of will” on the part of the Big Six to take the steps needed to address pricing problems.
Consumers should not be expected to have to “constantly defend themselves from excessive prices”, it added.
Ofgem should review the level of the cap at least every six months to keep up with changes in suppliers’ costs and consumer engagement, MPs said.
The regulator must also be “alert to and be prepared to stop” forms of pricing designed to dodge the cap by exploiting loopholes.
“We conclude that the Big Six have brought this policy intervention upon themselves by raising their prices in 2017 and by failing to take effective action against the overcharging of their customers on default and standard variable tariffs,” the committee’s report stated.
Citizens Advice said “loyal and vulnerable” customers had been “ripped off” for too long.
Chief executive Gillian Guy said: “An absolute cap, as recommended by the committee, is crucial to securing protection for the largest number of customers while continuing to provide competition in the market. This should apply to all default tariffs.
“However, we continue to hold reservations over the inclusion of a sunset clause tied to an arbitrary date. The decision to remove consumer protections should be dependent on whether the need for such protections still exists, not a fixed calendar date.”
Business Secretary Greg Clark said: “Today’s in depth independent report from MPs backs up exactly what we have been saying – that the energy market isn’t working for customers stuck on rip-off tariffs and that government intervention is justified.
“That’s why we’re taking action by bringing in laws to cap prices so that consumers are protected from high energy bills.”