Big Six price cap legal challenge a possibility

Eon boss refuses to rule out legal challenge as he warns cap 'could become permanent'

The Big Six suppliers could mount a legal challenge to the government’s planned market-wide energy price cap, according to one of the companies’ chief executives.

Eon CEO Michael Lewis refused to rule out a challenge when confronted on the issue by former shadow energy secretary Caroline Flint during a panel debate at the Energy UK annual conference this morning.

Flint said it was “a considerable worry” that suppliers would take the fight to court in a move which she said “would be hugely detrimental to the industry”.

Lewis said he was not prepared to respond to a hypothetical question, adding: “I have no idea of what the price cap looks like: we will see what Ofgem proposes.”

The Eon boss also warned that the cap on household energy bills could turn out to be permanent despite the government’s claims that it will be a temporary measure.

“There is a real possibility that the price cap could become permanent,” he said.

The government’s draft energy price cap bill, tabled in Parliament last week, states that the cap will be in place until 2020 with the option for Ofgem to extend it on an annual basis until 2023.

Lewis also reiterated his opposition to the government’s plan.

“The fundamental problem is one of engagement not price. There are very competitive prices for customers who are willing to engage, therefore the problem is one of engagement.

“We have embraced the notion that the end of the SVT is inevitable. I don’t believe the cap will be in the long-term interests of consumers.

“Vulnerable customers are in a different category. We are not going to stand in the way of any extension of the pre-payment cap to vulnerable customers. If you take vulnerable customers out of the equation, let the market work and competition deliver.”

Victoria MacGregor, director of energy at Citizens Advice, predicted that it would take 15 to 18 months for the government’s mooted market-wide cap to come into force, while Ofgem’s more limited safeguard tariff would not be implemented until February.

She challenged suppliers to ensure that all those customers, who are due to benefit from the cap, should pay no extra for their winter fuel bills.

Flint also warned the industry not to “make the mistake” of replacing SVTs with a slightly cheaper alternative. “That just won’t cut it,” she said. “We need to see all consumers getting better value tariffs.”

David Bird, chief executive of Co-operative Energy, said that job losses could be an “unintended consequence” of price caps because they may be the only way that companies can control costs and maintain margins.