Cap on prices to cut energy bills for 11m homes

ELEVEN million households will see their energy prices capped under legislation to be introduced by Theresa May today.

The cap, which will apply to anyone on a standard variable tariff for their gas and electricity, promises to save consumers as much as £300 by bringing overcharging under control.

Standard variable tariffs are typically more expensive than fixed-term contracts, punishing those who do not switch.

The Domestic Gas and Electricity (Tariff Cap) Bill would allow energy watchdog Ofgem to limit tariffs until 2020, with the option to extend the cap annually until 2023. The Government hopes it will become law before next winter.

The Prime Minister said the Bill would ‘force energy companies to change their ways’.

Mrs May said: ‘ It’s often older people or those on low incomes who are stuck on ripoff energy tariffs, so we are introducing legislation to force energy companies to change their ways.

‘Our price cap will cut bills for millions of families. This is another step we are taking to help people make ends meet as we build a country that works for everyone.’

Standard variable tariffs tend to be much more expensive than contracts that customers can get by shopping around. Many households are pushed on to them when their fixedterm deals come to an end.

A 2016 report found consumers were paying £1.4billion a year over the odds via standard variable tariffs.

Plans for a universal price cap were announced in last year’s Tory manifesto. But after the election Mrs May passed responsibility to Ofgem, which faced criticism for coming up with proposals to protect only the most vulnerable.

Frustrated by the lack of progress from the regulator, the Prime Minister announced legislation to rein in rip- off bills in her speech to the Tory conference in October.

Gillian Guy, chief executive of Citizens Advice, said the new Bill was ‘a significant step towards an energy market that works for everyone’.

She added: ‘Millions of loyal energy customers have been ripped off by their suppliers for too long. It’s essential that protections from overcharging remain in place for vulnerable energy customers after the cap is lifted.’

After 2020, Ofgem will recommend whether the caps should be extended on an annual basis to 2023. It will review the level at which the cap is set every six months.

Lawrence Slade, chief executive of Energy UK, which represents power companies, said: ‘It’s vital the cap doesn’t halt the growth of competition which is helping customers to find a better deal and save on their energy bills.’

‘It’s also important that the cap accurately reflects suppliers’ costs, most of which are out of their direct control.’