LONDON (Reuters) - Britain’s ruling Conservative Party said it would cap domestic energy prices if it retained power in an election in June, targeting an industry it accuses of not working properly and sending shares in the leading providers down sharply.
Shares in British energy suppliers Centrica and SSE fell as much as 5 percent, and were last down around 3 percent, after ministers said the Conservative’s election manifesto would include pledges on controlling energy prices.
Energy bills have doubled in Britain over the past decade to about 1,200 pounds ($1,640) a year, angering consumers who face rising inflation, and drawing the ire of politicians ahead of a June 8 national election. Energy companies say higher prices reflect increased wholesale costs and environmental levies.
Prime Minister Theresa May’s government has previously called for more competition in a sector dominated by the big six providers of Centrica, SSE, Scottish Power, Npower, E.ON and EDF.
The market regulator had already intervened to force the “big six” to cap prices for customers on prepayment meters and May’s party said it would go further if re-elected.
“There’s not been enough ability for people to switch, we haven’t seen the competition we were hoping to emerge amongst the energy companies,” Defense Secretary Michael Fallon told BBC radio.
“Therefore, it’s right to look at the way they are regulated and it’s right where we can to protect people against large and arbitrary increases in their bills.”
The policy echoes a 2015 election pledge by the opposition Labour party. Their plans for a cap on price hikes were lambasted at the time by Conservatives including Fallon, a former energy minister.
Another minister, Damian Green, had said on Sunday the Conservative manifesto would include measures on energy prices. He said the energy regulator would set a cap that could reflect market conditions, and that it would work differently from the Labour policy.
According to the Sunday Times newspaper, the plans could cut gas and electricity costs by 100 pounds ($128) a year for 17 million families.
Swiss investment bank UBS downgraded Centrica to “neutral” from “buy”, saying a tariff cap was “more likely than not.”
Analysts at Jefferies said British Gas owner Centrica was most exposed to a cap on prices, with “this policy potentially derailing their current downstream focused strategy,” although British Gas’s competitive tariff meant it would not feel the full estimated 100-pound impact of the policy.
Centrica condemned the proposal as against consumers’ interests. The proposals made Centrica and SSE the biggest fallers on a FTSE 100 index which was up 2.1 percent.
“Price regulation will result in reduced competition and choice, stifle innovation and potentially impact customer service,” Centrica Chief Executive Iain Conn said in a statement.
Editing by Mark Potter