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Why the energy price cap continues to be a bad fit

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In this week’s Gossage Gossip, our columnist discusses the energy price cap and why it continues to be a bad deal for UK consumers.

As my thousands of devoted readers will recall, I have consistently described the electricity price cap for residential consumers as a bad idea. This is true whether it is reassessed every six months, as of now, or quarterly, as the big energy companies, and now the regulator Ofgem, intend it to be. It should never have been instituted in the first place. It corrupts the market; it makes it more difficult for energy companies to hedge; and is stifling competition by effectively encouraging suppliers to charge the maximum permitted.  

Because the price cap is not applied to non-residential consumers, it means that in extreme times like today, electricity suppliers are being forced to hike the prices for business customers, to make up for the loss of margin on householders. Regulating prices for just one part of the market alone is like trying to force a post-Christmas waist into a pre-Christmas suit. The spillover is all too obvious to all.  

ITV’s MoneySavingExpert Martin Lewis is spot on when he brands Ofgem “a fucking disgrace that sells consumers down the river.”

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