Martin Lewis explains inflation and energy bills
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Mr Lewis CBE, financial journalist and founder of MoneySavingExpert.com, attended a briefing on Monday about Ofgem proposals to ease energy bills.
In April, the price cap increased by 54 percent to £1,971 per year for those on default tariffs.
Ofgem also shared on Monday the price cap on household energy bills could be reviewed four times per year.
The first price cap period under the new regime would be calculated using the past six months of wholesale gas and electricity prices, which have seen record highs.
Jonathan Brearley, Ofgem’s chief executive, admitted the changes could result in families seeing their energy bills hiked four times in a single year, but stressed it could also drop faster.
However, in the briefing with Mr Lewis, Ofgem said it was not making its proposed market stabilisation charge “harsher to really ‘stop the harmful effects of competition’”.
He claimed Ofgem said the charge would “prevent other firms needing to ‘exit the market’”, but added it would “lock in advantage to higher charging incumbent former monopoly firms”.
The twin changes, being the quarterly cap review and market stabilisation charge, let to Mr Lewis branding the changes as a “f***ing disgrace that sells consumers down the river”.
After apologising to Ofgem staff, and speaking to BBC Radio 5’s 5 Live Drive, Mr Lewis explained to Tony Livesey and Clare McDonnell his issues with the regulator’s proposals.
The broadcaster and expert said “this is being sold as if it’s beneficial to consumers”, and added “let’s be very plain: it’s not consumer groups who are suggesting this, it is the industry to protect energy firms”.
Mr Lewis then said: “My view is that we need to make sure we have fit and proper checks so that the new companies are able to have financial stability if they’re offering a cheaper rate.
“But ultimately, the first duty of an energy regulator, especially in the cost of living crisis, is to protect consumers, and this charge effectively says it will be very, very difficult for new companies to offer prices cheaper than the price cap when the whole sale price drops down.
“And that just doesn’t seem to be the right policy decision for me.”
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Mr Lewis added: “This boils down to a simple fact, there are two ways to run an energy market: You either regulate prices, which could include nationalising firms and regulating prices, or you go for a privatised model where you have competition.
“We have gone for a privatised model, rightly or wrongly … and then we’ve capped prices, and we’ve put in this anti-competitive clause, and effectively we’ve got a halfway house which is neither model.
“This has killed, and will kill, all future competition, so what’s the point of having a privatised market if you effectively are regulating against competition?”
Mr Lewis then added he left the meeting, saying “at least get rid of the outrageous charges on the standing charge” as “even if you cut all your usage because you’re desperate, the standing charge is so expensive you’re still paying a huge amount of money for gas and electricity, even if you’re not using it”.
Mr Lewis then said “the market is just broken” and “it doesn’t feel right” for consumers.
Speaking on Twitter, Mr Lewis apologised for his sweary attack on the Ofgem proposals.
He said on social media: “I lost it when getting a briefing about today’s proposals, where it feels like at every turn, in these desperate times where lives are at risk, it has ignored all asks for consumers and instead kowtowed to the industry (I hope history proves me wrong).”
Mr Lewis added: “Please accept that was (and this is) an emotional rant, not a considered piece.
“I pray when I do further analysis I have to apologise again as I’ve got it very wrong (if not I worry about dire consequences for consumers – we must do more to make things better for them).”
National Energy Action, which campaigns to prevent fuel poverty, said Ofgem’s changes could “cause further immense financial strain”.
Peter Smith. director of policy at NE, also added: “This change has the aggregate impact of reducing protections for fuel-poor households.”
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