Argentina Abandons Energy Price Cap as Britain Imposes One

The government is moving closer to imposing a new energy price cap meant to benefit middle income households (a price cap for low income households already exists). The Domestic Gas and Electricity (Tariff Cap) Bill is likely to be made law this summer. A new cap could be in operation by this winter. The law will require Ofgem to impose the cap on standard variable tariffs which will affect about 11 million contracts. The government claims the cap will save households up to £100 a year (or £8 a month)…

Last month Argentina’s government, led by a centre-right party, abandoned energy price caps, deeming the policy to have failed. Argentina deployed heavy state subsidies in electricity markets and set prices for consumers; as a result investment in the energy industry plummeted, the country lost its energy independence and power outages became frequent. Excitable investment notes are circulating in the City praising competition-focused free market energy reforms in that country and others. In the UK, the Competition and Markets Authority undertook a two year study and concluded it would advise government against price capping, which squeezes out smaller suppliers who require flexibility on price, entrenches the position of the big six and acts as a disincentive for consumers to switch suppliers so as to find the best company for them. That Tory manifesto opposition to  ‘untrammeled free markets’ in action…

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