Energy firms said: Bill Cap 'will hit consumers'

A cabinet minister said the Tories planned to intervene in the energy sector "to make markets work better".

But Scottish Power, one of the "Big Six" energy firms, told the BBC that the move would "stop competition" and "damage customers in the long run".

Shares in energy firms were hit by the proposed price cap.

British Gas owner Centrica fell about 5% and SSE was down more than 3% on Monday.

The energy industry has reacted with scepticism to the plan, saying it could lead to higher prices.

Labour said the proposal should be taken with "a pinch of salt", adding that energy bills had "soared" under a Conservative government.

Speaking to the BBC, Scottish Power's chief corporate officer, Keith Anderson, said: "If you put a cap on prices, you actually stop competition. That's the danger of price intervention."

When companies do not compete as much, that tends to lead to fewer benefits for customers, he said.

He added that if the Conservatives did intervene, it would be better if they abolished standard variable tariffs.

About 800,000 of the poorest pensioners and 1.5 million low-income families with children are on standard variable tariffs, according to Citizens Advice.

These households are paying an average of £141 more a year for a dual fuel gas and electricity bill than if they were on the cheapest deal, it said.

'Not working'

Defence Secretary Sir Michael Fallon defended the Conservative's intention to impose a cap on energy prices.

"We wanted to see more competition, we wanted to see more people able to switch between energy users," Sir Michael told the BBC. 

"That over the last three or four years has not happened. This is a market that is not working perfectly and therefore we are intervening to make markets work better," he added.

Co-leader of the Green Party Jonathan Bartley said the policy did not go far enough and he wanted more local choices of supplier for consumers.

But trade association body Energy UK said a cap could risk "billions in investment and jobs".

British Gas parent firm Centrica and fellow supplier E.On have both said market competition is essential.

Price comparison site uSwitch.com said that previous interventions in the energy sector had led to lower switching rates and higher prices.