Cornwall Insight’s chief executive Gareth Miller has become the latest voice to criticise the consumer price cap, and has called for wide-scale reform of the energy market to ‘future proof’ the sector from potential shocks and continual consumer price hikes.
Miller suggested the consumer price cap only deals with failings in the existing energy market and, at best, delay risks and costs, while at worst increasing them.
He said: “The cap will not protect consumers from increases in gas and power prices in the long run. Certainly, the cap has delayed the burden of these costs to consumers, but they will face them anyway as the default tariff cap rises in a lag to the rise in gas and power prices.”
The chief executive warned that policy makers need to stop focusing on short-term solutions to rising energy prices, with continued media speculation over potential Downing Street measures to fend off the winter crisis such as energy sector loans, scrapping VAT, expanding the Warm Home Discount scheme, and fiddling with the price caps.
Cornwall Insight has instead called for long-term policy shifts, such as reforms to domestic wholesale market, and for further studies on the relationship between consumer costs and wholesale prices, alongside more effort to be put into explaining to the public what it considers to be the multi-generational return on investing in renewables and reaching net zero carbon emissions by 2050.
Miller said: “None of this is politically easy, and of course the immediate focus is on the real crisis about to impact households in the here and now. However, we urgently also need to look to long-term reforms if we are to avoid lurching from winter crisis to winter crisis in the years to come.”
The think tank’s criticisms of the state of the current energy sector follow calls for reforms to the price cap from energy chiefs such as ScottishPower CEO Keith Anderson and Utilita Energy founder Bill Bullen.
Even John Penrose MP, who first proposed the cap in parliament, no longer considers it fit for purpose.
UK households are facing £2,000 yearly bills this spring, with Ofgem widely expected to hike the consumer price cap by 50 per cent from April when they meet on February 7.
Elsewhere, Citizens Advice previously accused market regulator Ofgem of failing to regulate the sector properly, and allowing poorly managed energy firms to continue operating unchecked prior to the five-fold rise in wholesale prices.
Ofgem has since announced plans to introduce hedging controls, and a financial stress test to ensure suppliers can grapple with market shocks.
However, they look set to maintain the price cap – which Downing Street considers crucial to protecting the poorest households – with the latest review from Ofgem likely to recommend shortening the review window from six months to three months.