* UK government says to tackle "large and arbitrary" price
* Jefferies says Centrica most affected by the proposed
* Shares of Centrica, SSE fall as much 5 percent
(Adds Centrica reaction)
By Kate Holton and Alistair Smout
LONDON, April 24 Britain's ruling Conservative
Party said it would cap domestic energy prices if it retained
power in an election in June, targeting an industry it accuses
of not working properly and sending shares in the leading
providers down sharply.
Shares in British energy suppliers Centrica and SSE
fell as much as 5 percent, and were last down around 3
percent, after ministers said the Conservative's election
manifesto would include pledges on controlling energy prices.
Energy bills have doubled in Britain over the past decade to
about 1,200 pounds ($1,640) a year, angering consumers who face
rising inflation, and drawing the ire of politicians ahead of a
June 8 national election. Energy companies say higher prices
reflect increased wholesale costs and environmental levies.
Prime Minister Theresa May's government has previously
called for more competition in a sector dominated by the big six
providers of Centrica, SSE, Scottish Power, Npower
, E.ON and EDF.
The market regulator had already intervened to force the
"big six" to cap prices for customers on prepayment meters and
May's party said it would go further if re-elected.
"There's not been enough ability for people to switch, we
haven't seen the competition we were hoping to emerge amongst
the energy companies," Defence Secretary Michael Fallon told BBC
"Therefore, it's right to look at the way they are regulated
and it's right where we can to protect people against large and
arbitrary increases in their bills."
The policy echoes a 2015 election pledge by the opposition
Labour party. Their plans for a cap on price hikes were
lambasted at the time by Conservatives including Fallon, a
former energy minister.
Another minister, Damian Green, had said on Sunday the
Conservative manifesto would include measures on energy prices.
He said the energy regulator would set a cap that could reflect
market conditions, and that it would work differently from the
According to the Sunday Times newspaper, the plans could cut
gas and electricity costs by 100 pounds ($128) a year for 17
Swiss investment bank UBS downgraded Centrica to "neutral"
from "buy", saying a tariff cap was "more likely than not."
Analysts at Jefferies said British Gas owner Centrica was
most exposed to a cap on prices, with "this policy potentially
derailing their current downstream focused strategy," although
British Gas's competitive tariff meant it would not feel the
full estimated 100-pound impact of the policy.
Centrica condemned the proposal as against consumers'
interests. The proposals made Centrica and SSE the biggest
fallers on a FTSE 100 index which was up 2.1 percent.
"Price regulation will result in reduced competition and
choice, stifle innovation and potentially impact customer
service," Centrica Chief Executive Iain Conn said in a
($1 = 0.7822 pounds)
(Editing by Mark Potter)