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U.K. Parliamentary Committee Wants to Stop Energy Suppliers From Overcharging Customers

Rachel Morison
Power transmission lines hang from electricity pylons near Uskmouth power station, operated by Simec Uskmouth Power Ltd., in Newport, U.K., on Wednesday, March 16, 2016. The former coal-fired station based on the east bank of the Usk estuary, will be converted to generate energy using biomass.

U.K. legislators are calling for long-term plans to protect customers from being overcharged by utilities even after a proposed price cap ends in 2023.

A committee of lawmakers has given its support to limiting the amount that power and gas companies can charge customers on default tariffs, in a report of recommendations published Tuesday. The government should push ahead to get the price cap bill passed before the parliamentary summer recess, the committee said.

“An energy price cap is now necessary and the government must act urgently to ensure it is in place to protect customers next winter,” said Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee. The biggest utilities “might whine and wail about the introduction of a price cap but they’ve been overcharging their customers on default” tariffs for years, she said.

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The government published a draft bill in October proposing a cap on the amount utilities can charge customers on so-called standard variable tariffs when their current deal runs out and they don’t switch supplier. The state intervention will be temporary with the cap ending in 2023. The committee wants the government and regulator Ofgem to ensure that utilities can’t revert back to overcharging as soon as the cap ends.

To read more about how the price cap is affecting utility shares click here

A Competition and Markets Authority investigation found that customers overpaid by 1.4 billion pounds ($1.9 billion) on their energy bills in the three years to 2015. The outcome was a price cap to protect customers on pre-payment meters. Theresa May’s government decided it was necessary to extend this protection to the 12 million “disengaged” customers on SVTs that haven’t switched suppliers.

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The committee concluded that the CMA’s remedies “would not necessarily fix the problems in the market soon enough.”

Energy companies including Centrica Plc and EDF Energy Plc have asked that they be given the right to appeal the level that the cap is set. Allowing this would risk slowing down the implementation of the cap, Ofgem said last month. The committee indicated it would not support an appeal process.

The committee were tasked with scrutinizing the bill and to suggest improvements before it becomes law.

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