The EPC was originally brought in under Theresa May's government as a time-limited intervention to protect customers from price-gouging from energy firms.
But a report from the Centre for Policy Studies (CPS), a centre-right think tank, said that since the 2022 energy crisis began, the EPC now functions as the "de facto price" for 29 million households, or almost the entire market.
Ofgem has also introduced policies that actively disincentivise firms from trying to attract new customers, the CPS added, which has effectively frozen the energy market, creating higher prices for consumers.
It called on the government to remove the EPC in its current form while strengthening protections for those who genuinely need support.
The research shows that for nearly two years, almost all tariffs have been priced at or just below the price-capped level, with no evidence this will change in the near future. This effectively means the government is setting the market price for energy and eliminating any chance of customers switching to a better deal.
In July, Ofgem lowered the EPC from £3,280 per year to £2,074 for the average household in England, Wales and Scotland. But with the energy price guarantee also coming to an end at the same time, households saw little relief from the lower cap.
The report also urges the government to introduce stronger protections against fuel poverty, for example a social tariff for households spending an excessive proportion of their income on energy bills.
It backs legislation that would scrap the "loyalty penalty" for those on default tariffs through regulation such as permanently banning low-priced tariffs that are solely in place to attract new customers.
CPS energy and environment researcher Dillon Smith said: "Contrary to its original intent, the energy crisis has transformed the EPC from a genuine cap to a state price control for virtually the entire market.
"Utility firms are being actively discouraged from offering new, more affordable deals to customers because of state interventions in the energy market. Competition has all but disappeared, meaning prices are being kept high, further contributing to measured inflation.
"Government needs to rethink the price cap, and deliver choice and competition for consumers. This should come alongside moves to introduce stronger protections against fuel poverty such as a social tariff."
