Energy stocks take hit on threat of bill cap from Conservatives

(c) Sky News 2017: <a href="http://news.sky.com/story/energy-stocks-take-hit-on-threat-of-bill-cap-from-conservatives-10849139">Energy stocks take hit on threat of bill cap from Conservatives</a>
 

Big Six energy firms Centrica (Frankfurt: A0DK6K - news) and SSE (LSE: SSE.L - news) each suffered a shares sell-off after the Conservatives signalled energy caps would be in their election manifesto.

They were among just three fallers on the FTSE 100, failing to benefit from a wider rally sparked by Emmanuel Macron's first-round French election win.

British Gas owner Centrica slipped by nearly 4% while SSE ended 2% lower in reaction to the prospect of a market intervention on standard variable tariffs.

Such a move had earlier been threatened by the Business, Energy and Industrial Strategy Secretary Greg Clark, who told MPs (BSE: MPSLTD.BO - news) last week that discussions with energy firm bosses had failed to change his mind on the need for action.

The Government has been mulling action as household suppliers raise standard charges - criticised historically by consumer groups - citing rising wholesale costs and other charges linked to Government measures.

In 2015 the Conservatives - under then-PM David Cameron - had rubbished as "Marxist" plans by the Labour leader of the day, Ed Miliband, to cap bills as a whole.

But under Theresa May's stated efforts to help the 'just about managing' (JAM) families, her Government - and the regulator Ofgem - have questioned the validity of the energy companies' arguments.

The Competition and Markets Authority had previously accused 'big six' firms of overcharging customers by up to £1.4bn a year.

EDF Energy hiked its standard bills for the second time this year with a 7.2% increase on top of an earlier 1.2% rise.

The industry has pointed to stronger switching figures and a market containing almost 50 suppliers as proof there is competition in the sector.

Lawrence Slade, chief executive Energy UK, said price caps were not the answer.

"Only last year, the Government's own competition regulator decided against introducing a wider price cap, instead opting for a cap for prepayment customers which came into force this month," he said.

"Intervening further would undermine so many of the positive changes that we are seeing in the retail market. It would be giving up on competition, and at a time when we need engaged consumers more than ever.

"Intervention on this scale will additionally create huge uncertainty around Government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system."

Labour elections chairman, Andrew Gwynne, said of the cap plan: "The Tories' promises to deal with energy bills should be taken with a huge pinch of salt.

"Time (Frankfurt: A11312 - news) and again they've promised action but when it comes to it they broke those promises. Under them, energy bills have soared".

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