Domestic Gas and Electricity (Tariff Cap) Bill

Debate between John Penrose and Stephen Kerr

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[John Penrose]

That argument has been advanced for both a relative cap and for an absolute cap; some people argue that it applies to both. We heard earlier a rather good explanation of why the argument does not really apply, which is that it would be commercial suicide, or a commercial kamikaze effort, for anybody to try to raise their prices in the switching market, which is highly competitive, because they would very rapidly start losing customers hand over fist. I understand that argument, but I do not think it would be relevant in practice.

[Stephen Kerr]

Just to underline the delicate nature of the balance that we are talking about in terms of caps, the majority view of the Competition and Markets Authority in its report was that a standard variable tariff cap would

“run excessive risks of undermining the competitive process”.

This would be likely to result in worse outcomes for consumers in the long run by

“reducing the incentives of suppliers to compete”

and

“reducing the incentives of customers to engage”,

so a delicate balance needs to be struck.

[John Penrose]

That is absolutely bang on the money. For goodness’ sake, the Competition and Markets Authority is suggesting such a thing, and that is after all its business.