One million households set to benefit from energy price cap

A limited price cap on energy bills has been announced by Ofgem - but the regulator has fallen short of a general cap promised earlier by the government.

Customers who will benefit from the cap will save 120 a year.

One million households who get the Warm Home Discount will see an energy price cap from February - an extension of the cap already in place for prepayment meter customers, which will save them around £120 a year.

Westminster business secretary Greg Clark said last week that a cap could be introduced this winter, but Ofgem said today that it will work with the Government so that all customers on standard variable and other “default tariffs” receive price protection “as soon as possible if legislation is in place”, which could take as long as a year.

Dermot Nolan, chief executive of Ofgem, said: “Ofgem shares the Government’s concern that the energy market is not working for all consumers and is determined to reduce the detriment suffered by those overpaying for their energy, particularly those who are vulnerable.

“The Government’s proposed bill to provide price protection to those who remain on poor value default deals, such as the standard variable tariff, will give these households peace of mind about the price they pay for their energy. In the meantime, we expect suppliers to do more to get customers on poor value default tariffs onto better deals.

“We also expect suppliers to co-operate when Ofgem initially introduces a safeguard tariff for around 1 million vulnerable households this winter. The introduction of further price protections will give time for Ofgem’s reforms to work and for smart meters to be rolled out across the country as we move towards a smarter, fairer, more competitive market.”

Consumer groups, however, warned that better competition in the market was needed - rather than a blanket price cap.

Richard Neudegg, head of regulation at uSwitch.com, said: “It’s absolutely right that Ofgem considers specific measures to help the most vulnerable households who need additional support. By focusing on the particular needs of a group of customers, rather than taking a one size fits all approach, we can identify those who need additional protection while helping others make active choices about their energy deal.

"The Government and Ofgem should focus deeper support to those who need it most, rather than a broad and damaging general price cap. It’s competition which ultimately drives prices down, not price caps. So while it's encouraging that suppliers will now be able to move customers onto another fixed deal when their current tariff expires, consumers must not be lulled into a false sense of security. Ofgem should compel suppliers to do more to put the power in consumers' hands, by prompting customers to shop around for a better deal for themselves.”

Rebecca Long-Bailey, Labour's shadow secretary of state for business, energy and industrial strategy, said: "The Government needs to hurry up and get on with it if customers are to feel the benefit this winter. It is now mid-October and we are yet to have sight of the legislation, despite Labour's persistent calls for the Government to take action."