Energy bill will ensure lowest price, says PM admitting he only raised plan as option for inclusion amid claims it is unworkable
David Cameron launched a belated attempt to firm up his widely criticised commitment to oblige all energy companies to provide customers with the lowest tariff.
But amid claims from opposition MPs and consumer groups that his plan was unworkable, the prime minister was forced to admit he had only raised an option for inclusion in the energy bill. He said he was considering requiring energy companies to put some direct debit customers on low tariffs with a customer’s right to opt out.
Attending the EU summit in Brussels, Cameron tried to counter claims his policy had unravelled, saying: “I want to be on the side of hard-pressed, hard-working families who often struggle to pay energy bills. That’s what I said in the House of Commons yesterday. We’re going to use the forthcoming legislation, the energy bill, coming up this year so that we make sure, we ensure that customers get the lowest tariffs. That’s what we’re going to do.”
A Downing Street source said: “This is very big. Energy prices is one of the biggest issues on the doorstep and we are determined to do something.” The source insisted the discussions had been going on for weeks, and was not something the prime minister said on the spur of the moment. Details would be set out in the forthcoming energy bill.
One of the options being examined is that people who are on a variable tariff and pay by direct debit could be informed by their provider that they were going to be automatically switched to the lowest variable direct debit tariff from the same provider. People would be able to opt out of automatic switching if they wanted to. Number 10 said this would make the system more transparent and promote competition between the companies to offer the cheapest tariffs.
It emerged that neither energy companies, the energy secretary, Ed Davey, or Cameron’s advisers had been forewarned he was going to make his pledge on Wednesday at prime minister’s questions.
He told MPs: “We will be legislating so energy companies have to give the lowest tariff to their customers.”
Asked on Thursday whether the prime minister’s pledge meant energy companies would only be able to offer one tariff – the cheapest – Davey said: “[Ensuring] consumers face the lowest bills possible is a priority for me. We have been in discussions across government. Ofgem has been talking about fewer tariffs and simpler bills and that is the direction of travel.”
Neil Bentley, deputy director general of the CBI, which is urging the government to end its feud over energy policy and back the green economy, said: “We are seeking policy clarity like everybody else. If competition is to work, consumers have to have a choice of tariffs. I’m not quite sure where the prime minister was coming from.” Labour said the proposal was unworkable given the complexity of current tariff structures.
The prime minister’s announcement was the first example since the Tory conference of Cameron making good on his commitment to be on the side of the “strivers”. He had promised to back strivers against vested interests such as energy companies, territory that Ed Miliband has sought to colonise. The episode has left energy companies, with billions of investment at stake, scrambling to discover Cameron’s true intentions.
The energy minister, John Hayes, revealed the level of ministerial ingnorance in an emergency statement to MPs in which he would only commit to getting people lower tariffs through “different options to be considered”. He added: “While the number of companies has shrunk, the number of tariffs has simultaneously grown by something like 400-fold. That is not sensible.” Much of his studiously vague statement was greeted with laughter by MPs.
Hayes suggested the government was looking to see if the voluntary agreement announced in April with energy firms should be made binding in legislation. That agreement required firms to tell customers of lower tariffs, but not to put them on the tariff automatically.
The prime minister’s spokeswoman said the government would “oblige companies to offer the lowest price to many consumers”. This stopped short of the blanket guarantee that energy companies would be forced to give all consumers the lowest prices – the measure apparently proposed by Cameron. She said ministers were looking at a variety of options. At its most minimal Cameron will now have to put a statutory obligation on energy companies to send a letter to customers setting out the lowest tariffs available to specific customers.
Caroline Flint, the shadow energy secretary, said: “We all mis-speak from time to time, and the prime minister was under a lot of pressure yesterday, but for the government to spend a day pretending to have a policy that they have no intention of implementing is no way to run a country. It is like something out of The Thick of It.”
Andy Atkins, Friends of the Earth executive director, said: “Cash-strapped households will continue to struggle with rising fuel bills while our energy system remains hooked on increasingly costly gas. Government must protect people from rising gas prices by helping people to insulate heat leaking homes.”
Caroline Lucas, the Green MP, said: “This is yet another major embarrassment for a government so bereft of ideas that it has fallen to making up nonsensical, evidence-free policy on the hoof.”
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