February 24, 2018

Government price cap to limit energy bills for 15m homes

13 October 2017, 08:34 | Melvin Schneider

Theresa May has said that she wants to cap tariffs for all 12 million households on poor value standard tariffs Andrew Milligan  PA

Theresa May has said that she wants to cap tariffs for all 12 million households on poor value standard tariffs

However, the ceiling on energy and gas bills is not expected to take effect until the winter of 2018/19 at the earliest.

Following the Prime Minister's announcement last week, Ofgem will work with the Government so that all those on standard variable and other default tariffs receive price protection as soon as possible if legislation is in place.

A pledge to change the law was included in the Conservative manifesto before June's General Election, but was dropped from the subsequent Queen's Speech after some Tory MPs claimed it was state intervention and anti-free market.

The cap is also expected to be an absolute rather than relative, where the difference between an energy company's most expensive and cheapest plan is restricted.

Suppliers reacted with fury as billions of pounds were wiped off the value of their shares after the pledge.

Ofgem says it will then look to extend the cap to a further two million vulnerable households for winter next year, as part of a series of plans announced today to tackle high energy prices.

Ofgem, the energy regulator, will be instructed to implement the cap once it is formally introduced.

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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.

"It has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much".

Business and Energy Secretary Greg Clark said that customers of the big six energy suppliers were "overpaying to the tune of £1.4bn a year".

Around two-thirds of energy customers in Britain are on those tariffs, i.e. 18 million customer accounts - four million of which are on prepayment meters and are now protected by a price cap.

Four million of those are on pre-payment meters. This is created to build cross-party consensus on how the price cap will work.

Speaking to Sky News, she challenged the Government to meet her party's plans for a cap of £1,000 on the average household energy bill. "While five million households will see their bills capped from this winter, I want to see every household protected from rip off bills".

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