UK's CMA seeks energy suppliers' response to price cap alternative

LONDON, Oct (HKSE: 3366-OL.HK - news) 26 (Reuters) - Britain's competition watchdog on Monday asked the energy retail industry for responses to a new type of customer contract suggested by two big suppliers as a way of avoiding a regulator-imposed price cap.

Britain's Competition and Markets Authority (CMA) said in its initial findings in July that the largest suppliers may face a price cap after finding customers had been overcharged by some 1.2 billion pounds a year by being automatically rolled over to a higher-priced tariff when their contract expired.

The new remedy, initially proposed by Britain's largest supplier Centrica (LSE: CNA.L - news) and Scottish Power, would mean energy users whose contracts expire are placed on a fixed-term tariff, allowing them to switch supplier at any point free of charge.

The CMA said on Monday it would now collect responses to this proposal by Nov. 9 and in January make a provisional decision on which remedies to impose on energy suppliers to increase competition in the market.

Centrica and Scottish Power presented their proposal to the regulator as an alternative to the CMA's suggested price cap remedy.

"There are more effective ways of addressing competition concerns than the introduction of a regulator-determined 'Safeguard Tariff' cap," Centrica said.

The companies' argument is that customers who are given notice of a supply contract ending are more likely to shop for a better deal than those told about a cheaper deal on an annual basis.

A final outcome of the investigation is due June 25, 2016. (Reporting by Karolin Schaps, editing by David Evans)