Theresa May will offer voters a cap on energy price increases, but some firms say it's not "a magic bullet"

 
Mark Sands
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The UK will head to the polls on 8 June. (Source: Getty)

Prime Minister Theresa May looks set to offer voters a new cap on increases to energy prices in the Conservatives election manifesto, but some firms are already warning against the "magic bullet" plan.

Tory MPs have been briefed to expect an intervention into the energy market just days after business secretary Greg Clark vowed to take "decisive action".

Speaking on ITV's Peston on Sunday, work and pensions secretary Damian Green said: "There will be a lot about energy policy in the manifesto."

He added: "People feel that some of the big energy companies have taken advantage of them.

The policy will likely be compared to a 2015 offer from Labour to freeze energy prices, but Green said the policies were distinct.

"The difference is that we would have Ofgem setting the limits so it would be a cap, so it would be more flexible"

Read More: May likely to accelerate her energy market intervention

However, the plans are already under fire, with the boss of one of the UK's largest energy firms blasting proposals.

Iain Conn, chief executive of British Gas owner Centrica said: "We do not believe price regulation is in consumers’ interests.

He added: "Price regulation will result in reduced competition and choice, stifle innovation and potentially impact customer service."

Price comparison service uSwitch has also attacked the plans. Head of regulation Richard Neudegg said: “Price caps may sound like a magic bullet, but heavy-handed price intervention could have the unintended effect of leaving consumers worse off."

He added: “A price cap would be the death knell for competition. It would remove any incentive for energy companies to drive down prices and fight to keep their customers, entrenching the position of the incumbent big six."

Read More: Three challenger energy firms have come out in favour of a new price cap

Prime Minister Theresa May has previously cited the energy sector as an area ripe for government intervention, and the plans look set to be based on proposals for a relative price cap put forward by Tory backbencher John Penrose, with the Sunday Times claiming they could cut energy bills by as much as £100 a year.

Responding, Penrose said: "The government is clear it's going to act. 20m or more of us are ripped off by the big six and I'm delighted that my proposals are making their way into our manifesto.”

A Conservative spokesman said: “Our manifesto will be announced in due course – but you can expect us to be introducing new policies in this area.

"We are prepared to intervene when markets are not working for ordinary working families and that is certainly true for expensive and unfair standard energy tariffs.”

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