Rishi Sunak has said the energy market must be “urgently” reformed to ensure households are not hit by huge price rises in the future, though he warned any changes would take time to be implemented.
The chancellor was asked by Money Saving Expert’s Martin Lewis why the UK doesn’t adopt a similar policy to other European countries in limiting the energy price cap rise.
In France, for example, the energy price cap for 2022 was lifted by just 4 per cent. In the UK, the energy price cap increased by 12 per cent in October 2021 and 54 per cent in April 2022.
The April increase is equivalent to £700 for “typical” levels of dual fuel consumption paid by direct debit, and consumers are braced for the energy price cap to rise by more than £800 to £2,800 in October as the squeeze on living standards continues.
Mr Lewis suggested Mr Sunak could regulate to stop energy companies imposing astronomical increases in bills, by imposing a limit on how much energy bills can rise.
The chancellor replied: “We do have an independent regulator who does exactly that, and we do have a price cap. Many other countries didn’t have a price cap.”
Mr Sunak went on to committ to reforming the energy market, acknowledging it was not “working as well as we want it to work”.
He said: “With regard to electricity generation, we have said that we will reform the market in a similar way to what some of the other European countries have done. That will take a bit of time which is why I said today I am urgently looking at the best way to do that in advance of reforms happening.”
He added: “I am actually sympathetic to the idea that that market isn’t working as well as we want it to work. These people providing electricity are getting to sell that electricity at the very high prices of natural gas, not the cost of what it costs them to produce the electricity.
“That isn’t ideal, we want to see how we can fix that. That’s what some other countries have done.”
Earlier on Thursday during his cost-of-living statement in the Commons, Mr Sunak said: “The price electricity generators are paid is linked not to the costs they incur in providing that electricity but rather to the price of natural gas – which is extraordinarily high right now.
“Other countries like France, Italy, Spain and Greece have already taken measures to correct this.
“As set out in the Energy Security Strategy, we are consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
“Those reforms will take time to implement.
“So, in the meantime, we are urgently evaluating the scale of these extraordinary profits and the appropriate steps to take.”
