“Scrap the price cap”, urges Scottish Power’s boss


The boss of a major UK energy generator-retailer has called for the scrapping of Ofgem’s price cap on domestic power bills.

Interviewed by the BBC, ScottishPower chief executive Keith Anderson accused the regulator of not keeping up with developments in wholesale gas markets, where prices have soared sixfold this year, sending an estimated sixteen small suppliers to the wall.

Requiring solvent licensees to assume supply to millions of homes left stranded by poorly-hedged firms’ failures, was imposing “a massive burden” on remaining companies, Anderson said.  It ensured retail prices were likely to rise for another 12 months at least, he predicted in conversation with the BBC’s Simon Jack.

Today the regulator announced it had appointed that Shell Energy Retail to take over the 22,000 domestic accounts of GOTO Energy, which closed on Friday.

Anderson told the BBC that a one-size-fits-all cap was regressive. It failed even to protect more vulnerable customers, who spend a disproportionate amount of household income on energy.

Replacing the current cap with a regulatory tariff for homes at risk of fuel poverty was Anderson’s solution.  Design of the UK power market, and Ofgem’s tools to regulate it, needed overhauling, he said, to correct recent mistakes.

“There was a fixation about trying to create more and more competition and get more and more companies into the energy sector. But it went too far”, Anderson judged.

“We ended up with a raft of small, not particularly well-run organisations coming into the retail sector. This crisis has shown this is quite a risky .”

“Every customer taken on at the price cap (level of retail) means £1,000 of cost,” he said.

“We estimate the total cost to the industry of between £4bn and £5bn. The risk is that you will end up going back to the big five or the big six.”


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