British Gas owner Centrica wades into legal battle with regulator Ofgem over price cap

Centrica, the owner of British Gas, this evening confirmed it will tomorrow kick start a legal battle with regulator Ofgem over the energy price cap soon to be introduced in the UK.

The energy giant will apply for a judicial review of the regulator’s decision to change the dates within which wholesale prices were used to calculate the cap.

Shares in Centrica dropped last month as it revealed the cap would cost £70m in the first quarter of next year.

The £1,137 cap, revealed by regulator Ofgem last month, is £68 lower than prices paid by 3.1m British Gas customers.

It has already reduced the number of customers on its £1,205 standard variable tariff from 4.3m at the start of this year.

The company said it expects to shed another 100,000 customers from the tariff by the end of the year as it prepares for the price cap, which starts on 1 January.

An insider stressed the company was not trying to stop the cap happening, only challenging one aspect of it, specifically around Ofgem’s methodology for calculating wholesale costs

A Centrica spokesperson said: “Centrica plc is seeking judicial review of Ofgem’s decision of 6 November 2018, which relates only to 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.

“Through this action Centrica has no intention to delay implementation of the cap, and does not expect the cap to be deferred in any way.

“As we have previously said, 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."

Energy providers Npower and Scottish Power have given encouragement to Centrica over the challenge, but are not thought to be formally participating in the action, according to Sky News.