Energy firms say price cap on bills could hit UK roll-out of smart meters

11 December 2017

Theresa May’s price cap on energy bills risks damaging her government’s hopes of installing millions more smart meters in homes, two of the UK’s biggest energy companies have warned.

In evidence submitted to the business, energy and industrial strategy committee , British Gas owner Centrica said: “We believe the price cap will damage the rollout of smart meters and may reduce the total number of meters installed.”

The country’s biggest energy supplier also said if the cap was set too low, energy firms would be unable to recover their costs, slowing down or even stalling the rollout.

That warning was echoed by E.ON. It said too low a cap would squeeze companies’ profits or push them into a loss, making it difficult or too expensive for them to access capital for the devices. The roll-out “would be constrained by what a supplier could afford”, E.ON added.

The government target is for every home and business to have been offered one of the meters, which automate readings and pave the way for innovative new tariffs, by the end of 2020.

Centrica, E.ON and the other four of the big six energy also said investment in the sector was in jeopardy if the government did not allow for energy companies to challenge the level at which bills are capped.

As it stands, the cap’s draft legislation appears to block companies from appealing to the UK’s competition watchdog, which ScottishPower said broke with standard practice since the energy market was privatised.

Business groups said energy firms were concerned that their only route to appeal was via a judicial review, which one smaller company, Co-Op Energy, said was prohibitively expensive for all but the biggest suppliers.

The CBI said: “This approach also seems inconsistent with other regulated markets and risks setting a precedent which could spread to other sectors and knock investor confidence in the future.”

However, MPs, consumer groups and smaller suppliers that control about a fifth of the market gave their backing to the price cap.

The Labour MP Rachel Reeves, who chairs the committee, said: “The government needs to act to stamp out energy companies exploiting loyal customers and leaving these consumers stuck on overinflated energy tariffs. It will come as little surprise to these customers that the big six energy companies oppose a price cap which could reduce consumer bills.”

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