Published: Sun, September 09, 2018
Markets | By Otis Pena

Ofgem energy price cap will cut priciest 'Big Six' tariffs by £120

Ofgem energy price cap will cut priciest 'Big Six' tariffs by £120

Britain's energy watchdog on Thursday proposed a temporary price cap on gas and electricity that could benefit 11 million households, notably the most vulnerable exposed to excessive cost hikes.

When the energy price cap is introduced, energy suppliers will have to cut their energy prices to the level of or below the cap, proposed to be £1136 per year for a typical dual fuel customer paying by direct debit, forcing them to scrap excess charges for people on poor value default deals.

"The price cap is created to be a temporary measure, in place until 2023 at the latest", the watchdog said.

Dermot Nolan, chief executive of Ofgem, said it was "a tough price cap which will give a fairer deal to consumers".

Both Prime Minister Theresa May's Conservative government and the Labour opposition have backed the price cap after evidence that utilities were overcharging their customers.

'Consumers can have confidence that falls in energy costs will be passed on to them and if costs increase, Ofgem will ensure that any rise will be due to genuine increases in energy costs rather than supplier profiteering. It will then stay in place until 2023.

In total, the price cap would save consumers around £1 billion.

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Responding to today's announcement, chief executive of Energy UK Lawrence Slade, said: "There are over 70 suppliers in the energy market who will now be assessing how this impacts their individual business, however for many suppliers this will pose a significant challenge".

We are about to go into winter - the season of the biggest energy bills - after a period of unprecedented energy price rises and with 11 million households still sitting on expensive standard variable tariffs.

Nevertheless, the company reiterated its position that caps were not sustainable for the United Kingdom energy market.

Justin Bowden, national officer of the GMB union - which represents energy workers, said: "The only way to protect consumers from being ripped off in a monopoly situation is if the Government itself takes on the functions of energy regulation including the role of energy price control - making it accountable to Parliament, subject to scrutiny and with powers to limit profits and, where necessary, to finance and run power stations".

Peter Earl, head of energy at Compare the Market, says the price cap will only protect United Kingdom households from the "worst excesses of standard variable tariffs".

He says: "The price cap is only a sticking plaster and will not fix the fundamental failings within the energy market. The best way to drive down prices is to increase competition through regular switching".

While the move has been warmly welcomed by consumer campaigners, there are fears some could be lulled into thinking they no longer need to bother shopping around for the best deal.

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