Britain's regulator should impose energy price cap despite legal challenge risk - minister

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By Nina Chestney

LONDON, Nov 1 (Reuters) - Britain's energy market regulator Ofgem should use its power to impose an energy price cap despite the risk of a legal challenge by some suppliers, Greg Clark, Britain's secretary of state for Business, Energy and Industrial Strategy, said on Wednesday.

Earlier this month, the British government ordered Ofgem to come up with price caps on the retail energy sector, the biggest market intervention since it was privatised almost 30 years ago.

Under the government bill, Ofgem would set the terms of the cap which will last initially until 2020. The bill needs to be scrutinised by Parliament before it can begin the legislative process.

However, some energy companies have refused to rule out the possibility of mounting a legal challenge to the cap.

"I would prefer Ofgem to make use of their powers so we could then get on with it immediately," Clark told a parliamentary committee.

"Public policy is often subject to the possibility of legal challenge ... you can also defend (one). I would be very disappointed if there were a legal challenge by some of the energy companies," he said.

Britain's energy market is dominated by the so-called big six providers - Centrica (Frankfurt: A0DK6K - news) 's British Gas, SSE (Amsterdam: UW8.AS - news) Iberdrola (Amsterdam: ID6.AS - news) 's Scottish Power, Innogy's npower, E.ON and EDF Energy.

Some market participants are concerned that the cap will become permanent but Clark said no one has recommended that.

"The right thing when introducing legislation and regulation is to have a defined period that expires. It is for future decision-makers to determine whether the situation has been resolved but the right expectation is this should be a time-limited cap," Clark added.

Last year, the Competition and Markets Authority found that British households overpaid a total of 1.4 billion pounds a year on average from 2012 to 2015 because of uncompetitive standard energy tariffs. Utilities have denied overcharging.

Clark said the price cap should eliminate excessive charging, increase levels of competition and correct the imbalance between consumers and suppliers, together with a new generation smart meters.

He could not guarantee price caps would be in place by next winter but said he would be working hard to ensure the bill proceeds quickly through Parliament. (Reporting by Nina Chestney; editing by Jeremy Gaunt)