Centrica plc Initial Reaction to Ofgem’s Statutory Consultation on the Default Tariff Price Cap

We are in the process of reviewing the many papers Ofgem has issued today, and a detailed evaluation will take some time.  The number of dimensions considered by Ofgem demonstrates that the design and implementation of a temporary default tariff cap was never going to be straightforward. We look forward to participating in the final consultation period in October.
Centrica has been actively engaged this year in all stages of Ofgem’s consultation on the proposed design and implementation of a default tariff cap. This has included making detailed submissions to Ofgem’s five working papers on key issues such as the differing cost to supply and serve different customers, the methodology for calculating wholesale costs, how a price cap can accommodate smart metering costs, and how to set the cap to encourage competition.

Since the announcement of the CMA investigation into the functioning of the UK energy market over four years ago, our focus has been on making proposals to improve the functioning of the market for the benefit of customers. As the UK’s market leader, we have set out detailed and comprehensive proposals which we are now implementing. This includes withdrawing the Standard Variable Tariff for new customers to improve customer engagement, and giving customers improved service and greater choice.

We do not believe a price cap is a sustainable solution for the market, and is likely to have unintended consequences for customers and for competition, but we are positioning Centrica to serve our customers effectively and deliver a profitable energy supply business under the temporary default tariff cap.