The UK Domestic Gas Electricity (Tariff Cap) Act: Re-Regulating the Retail Energy Market

Abstract

The UK retail energy market has witnessed multiple regulatory interventions since its liberalization almost two decades ago. Such interventions reached their peak with the enactment of the UK Domestic Gas Electricity (Tariff Cap) Act in July 2018. The Act puts in place a requirement on the independent regulator, the Office of Gas and Electricity Markets (Ofgem), to set an absolute price cap on poor value tariffs. As such, it signals a repudiation of the overarching paradigm of consumer empowerment that has informed regulatory remedies to date. Rather than advocating for a different paradigm, this article highlights the difficulties inherent in reconciling price caps – both practically and conceptually – with the competitive process and consumer empowerment. It further brings to the fore other instruments, not necessarily exhausted in retail price regulation, that can render affordable energy prices, without sacrificing consumer empowerment.

Keywords: Price Caps, Retail Energy Market, Competition, Regulation, Consumer Empowerment, Consumer Protection

JEL Classification: K21, K23