Scottish Power: energy price cap not working
The UK’s energy price cap is not working and the country is now paying the price, argues the boss of Spanish energy giant Iberdrola.
Ignacio Galan, chief executive of Iberdrola, which owns Scottish Power, believed that the price cap is a short-term solution to protect consumers that has caused long-term damage to the market.
He said: “The price cap decision was made in a very particular situation, to protect the consumer. But when the situation changes, it doesn’t work. We are paying the consequences for it now. When you intervene in the market, you can resolve a temporary issue, but you cannot change things in the future.”
The energy price cap is designed to protect domestic consumers by limiting how much energy providers can charge them per unit.
Currently, the cap is set at £1,277 per year for average consumers.
With wholesale gas prices soaring following global shortages, the price cap is requiring UK energy firms to charge less for gas than it costs them to supply it.
Since the start of September, 13 UK firms have gone bust.
Four have ceased trading in the previous week alone, including Pure Planet, Colorado Energy, Daligas and Goto Energy.
PWC have now been appointed as administrators to Pure Planet.
Nevertheless, Galan argued that the situation was temporary which is why he questioned the need for a loss-making price cap.
He said “There is a difficult situation right now, but it will probably disappear in a few months. The reason it’s happening is because of a shortage of gas supply, but that’s not going to last forever. So we have to be very consistent in our approach.”
Galan was speaking at the government’s Global Investment Summit in London.
The summit is aiming to attract more foreign investment in the UK, particularly in green technologies
Galan’s comments follow Iberdrola’s confirmed plans to invest £6bn in offshore wind farms off the coast of Suffolk.
The plans could create up to 7,000 jobs if the sites receive planning permission.