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Conservatives Playing With Fire By Planning Energy Bill Cap

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Ian King, Sky News

It would be interesting to know what the Conservative Party knows about the inner workings of the energy market that the experts at the Competition & Markets Authority (CMA), who are paid to look at these things, do not.

The Tories promised on Sunday they would, if re-elected, cap energy prices for the two-thirds of British households currently on a standard tariff.

This comes just months after the CMA, having conducted a two-year investigation into the household energy supply market, concluded there was no case for such a cap.

Moreover, it comes two years after the Labour Party under Ed Miliband went into the 2015 election campaign with a similar pledge that, as Mr Miliband’s former communications director, Tom Baldwin, has noted, was derided by the Tories as ‘Communism’.

Sir Michael Fallon, the defence secretary, insisted today there is a subtle difference between the two policies.

Mr Miliband proposed a 20-month freeze on energy bills which, after he announced the policy at his 2013 party conference, was ironically followed by a steady two-year decline in wholesale prices.

The Tories argue they want a price cap that would benefit customers in the event of prices falling and have insisted that the media waits to see the small print.

This looks like clever politics but poor policy-making. It is odd, when the UK’s main competition watchdog has spent two years looking at a market, to ignore its recommendations.

Implementing a policy like this will undermine both the CMA and Ofgem, the energy regulator, as well as un-nerving investors. The latter are already heading for the exit in some cases: shares of British Gas owner Centrica and SSE, the biggest two household energy suppliers, have fallen sharply on Monday, wiping hundreds of millions of pounds wiped from the market value of both.

There is also a danger that, far from merely crimping energy company profits, as the Conservatives appear to want to do, a price cap like this could actually tip some operators into the red, something about which the CMA warned when it ruled out a cap.

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