UK Conservatives pledge energy price cap, hitting utility shares


LONDON: Britain’s ruling Conservative Party said it would cap domestic energy prices if it retained power in an election in June, targeting an industry it accuses of not working properly and sending shares in the leading providers down sharply.
Shares in British energy suppliers Centrica and SSE fell by 4-5 percent after ministers said the Conservative’s election manifesto would include pledges on controlling energy prices.
Energy bills have doubled in Britain over the past decade to about £1,200 ($1,640) a year, angering consumers who face rising inflation and drawing the ire of politicians ahead of a June 8 national election. Energy companies say higher prices reflect increased wholesale costs and environmental levies.
Prime Minister Theresa May’s government has previously said the energy market does not work properly and called for more competition in a sector dominated by the big six providers of Centrica, SSE, Scottish Power, Npower, E.ON and EDF.
The market regulator had already intervened to force the “big six” to cap prices for customers on prepayment meters and May’s party said it would go further if re-elected.
“There has not been enough ability for people to switch, we have not seen the competition we were hoping to emerge among the energy companies,” Defense Secretary Michael Fallon told BBC radio.
“Therefore, it is right to look at the way they are regulated and it is right where we can to protect people against large and arbitrary increases in their bills.”
The policy echoes a 2015 election pledge by the opposition Labour party. Their plans for a cap on price hikes were lambasted at the time by Conservatives including Fallon, a former energy minister.
Another minister, Damian Green, had said on Sunday the Conservative manifesto would include measures on energy prices. He said that the energy regulator would set a cap that could reflect market conditions.
According to the Sunday Times newspaper, the plans could cut gas and electricity costs by £100 ($128) a year for 17 million families.
Analysts at Jefferies said British Gas owner Centrica was most exposed to a cap on prices, with “this policy potentially derailing their current downstream focused strategy.”
However, the analysts said that British Gas would not feel the full 100 pound-a-customer impact, as its tariff was competitive versus its peers. The utility firms underperformed a 1.6 percent for the broad FTSE 100 index.