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Centrica plans legal challenge to energy price cap

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Written by: Danielle Levy
21/12/2018
British Gas owner Centrica is planning to launch a legal challenge against the government’s upcoming energy price cap.

The energy provider is set to apply for a judicial review against regulator Ofgem, challenging the way the cap is calculated using the wholesale cost of energy.

Centrica said it has no intention of delaying implementation of the cap, but continues to take the view that the price cap offers no benefit to consumers.

The price cap will apply to default tariffs and aims to prevent energy providers from charging more than £1,137 for a typical duel fuel tariff from 1 January. The cap will be in place until 2020.

“We do not believe that a price cap will benefit customers, but we want to ensure that there is a transparent and rigorous regulatory process to deliver a price cap that allows suppliers, as a minimum, to continue to operate to meet the requirements of all customers,” Centrica explained.

The judicial review relates to Ofgem’s decision of 6 November 2018 and the treatment of wholesale cost transitional arrangements.

“And Ofgem’s decision not to investigate and correct its failure to enable the recovery of the wholesale energy costs that all suppliers incur,” Centrica said.

Mark Gutteridge, managing director of leading auto-switching service Flipper Energy, described Centrica’s planned legal challenge as “an astounding course of action”.

“Ofgem announced the cap months ago and has already indicated that the cap level is likely to increase anyway in April 2019,” he said.

Gutteridge pointed out that Ofgem’s own figures show the best deals available are more than £200 lower than the cap for the same usage, based on a customer paying by direct debit with typical energy usage.

“Whatever the outcome of this challenge, it’s another example of energy customers not being put first, and another good reason for consumers to consider switching their energy supplier,” he added.

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