The evidence underpinning ministers’ plans to cap the energy bills of millions of people has been slammed as “weak and confused” by the government’s own watchdog.
As the government laid the legislation for the cap in parliament, the regulatory policy committee delivered a withering verdict on the case for a measure that Theresa May said was necessary to stop “rip-off” tariffs. The committee said the government had not offered “any evidence in support” of its decision to cap the standard variable tariffs of 11m households, a move the competition watchdog expressly advised against two years ago.
“In general, the evidence the Department [for Business, Energy and Industrial Strategy] presents in support of its rationale and selected option is weak, and even confused,” the watchdog said.
Officials were criticised for providing a limited and optimistic view of the possible market distortions the cap might have. The committee added that it was of “particular concern” that the business department had also failed to give even indicative costs of the scheme, such as those that might be borne by energy suppliers.
A spokesperson for BEIS said: “The RPC rated our evidence to support plans to cap energy bills as green or ‘fit-for-purpose’.”
However, the scathing report by the regulatory policy committee will be an embarrassment for the government, which published the legislation on Monday in order to impose the cap by next winter.
Ministers argue consumers are overpaying for energy by £1.4bn a year because of the difference between the best and worst value tariffs.
“It’s often older people or those on low incomes who are stuck on rip-off energy tariffs, so today we are introducing legislation to force energy companies to change their ways,” the prime minister said.
Greg Clark, the business secretary, warned the big six energy companies against legal challenges to the cap, telling them in a letter on Monday that he hoped they would “work constructively” with government.
Clark has also told Dermot Nolan, the chief executive of energy regulator Ofgem, to consult with firms on the cap while the legislation passes through parliament in the next five months. Under the plan, Ofgem will be required to review the level of the cap every six months. Analysts believe the cap could be set at around £1,050, about £100 lower than the most expensive standard variable tariffs.
Consumer group Citizens Advice welcomed the government moving ahead with the cap. “This bill should go some way to ending the unacceptable overcharging of loyal customers, and will cut prices for 12m households currently stuck on poor value default tariffs,” said Gillian Guy, the group’s chief executive.
