Government agrees review of bills before lifting price cap as Labour drops amendment

The government has agreed to carry out a review of household bills before its proposed energy price cap is lifted.

In return for the government concession, Labour has agreed to drop an amendment to the price cap legislation, which would have banned so called “tease and squeeze” tactics that critics say suppliers use to lure in customers with cut-price tariffs.

The Domestic Gas and Electricity (Tariff Cap) Bill, which requires Ofgem to impose an absolute cap on standard variable and other default energy tariffs until at least 2020, is due to reach its final Parliamentary stage tomorrow in the House of Commons.

MPs will consider Labour amendment to introduce a permanent relative cap on prices, which would limit the gap between the highest and lowest tariffs charged by suppliers.

The government’s counter-amendment says the review will cover the pricing practices of household suppliers and deal with the question of whether customers paying on standard variable or other default tariffs should be provided with protection against excessive charges.

The review must also consider whether suppliers will offer “excessive” differentials on tariffs when the cap ends.

The review would offer extended protection for customers if required.

Under the bill, the cap will be in place until 2020 after which Ofgem will recommend on an annual basis to the government whether it should be extended up to the final cut-off date of 2023.

Alan Whitehead, shadow energy and climate change minister, said: “After long delays the government is finally bringing Labour’s energy price cap idea into law. We’ve been calling for this cap for a long time and families have had to endure years without protection from rip off energy bills.

“Though this is only a temporary cap, Labour have been working hard to negotiate with the government and have secured agreements which keep the door open for future protections.

“Unlike Labour, the government have neither been able to confirm how much bill payers will save nor do they appear to have plans for the long term reform the energy system. Only a Labour government will protect customers and fix our broken energy market.”

The opposition’s agreement to drop its relative price cap amendment clears the way for the government’s bill to become law and for the price cap to be introduced by the winter.

BEIS has been contacted for comment.