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Energy Caps Will Only Make Things Worse for Centrica

By Malcolm Stacey | Friday 12 May 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Squishers. It seems fairly obvious that gas and electricity supply companies may well see slimmer share prices after all this general election talk about capping energy bills. But so far, the market has not cropped shares by very much.

This is despite both Labour and Tories saying they will impose price caps - and I think that share prices for utilities are going to suffer more, once the penny has had time to drop. That might apply vigorously to Centrica (CNA) which trades under the name of British Gas.

I long ago dumped a rather big and long-term holding of Centrica shares, after doing rather well. But the share price became unstable. That share price is down about 6%, as I write, but I think it may get worse than that. And I say that even though the P/E ratio I have is only 6 and the dividend yield 6.3%.

Even before the threatened capping, Ofgem, the watchdog, is already pressing down on variable tariffs. There is also increasing awareness of being able to find cheap gas and electricity by clicking onto comparison sites. If you’ve not done that yet, try it and be amazed at how simple it is to switch to a cheaper supplier.

Even though British Gas was the only big supplier that did not put up its prices last winter, it lost 260,000 customers in the first quarter of this year. If that continues, it’ll drop 1 million users in a year. So you see that competition, a big enemy of us share shifters, is fierce.

It may not be long before the big six suppliers, including Centrica, will be fighting a price war tooth-and-nail. Even if the next government does not cap prices, which of course it will.

And now let’s sojourn to the Punter’s Return.

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