Energy firms could raise bills by £810m to fund cap

A PRICE cap to save energy customers on the most expensive tariffs £1billion a year will be largely funded by higher bills for those on cheaper deals.

Industry regulator Ofgem said the cap on costly standard variable tariffs would be set at £1,136 a year – saving 11 million households an average of £75.

The amount falls short of the £100-a-year saving promised by Theresa May.

Ofgem admitted those who shop around for the lowest fixed-rate deals could face rising bills to cover the cost. The move would allow the main providers to minimise losses.

Although many new energy companies have been set up in the past two years the market is dominated by British Gas, SSE, E.ON, EDF Energy, Npower and ScottishPower. Analysts believe the changes, unlikely to take effect until December 31, have let the ‘Big Six’ off the hook. The share prices of Centrica, parent company of British Gas, and SSE rose sharply as a result.

The price cap is due to be reviewed in April and could rise by more than £100 a year to reflect rising wholesale energy costs, which would wipe out any savings.

Richard Neudegg, of uSwitch, said the cap was almost £300 more expensive than the cheapest deal on the market.

He said: ‘Customers moving to a better deal will be the ones hardest hit, with the potential for bills to rise by up to £810million.’

Lawrence Slade of Energy UK, which represents the power companies, said that the price cap would ‘pose a significant challenge’ for many suppliers.

‘Those on cheap deals hardest hit’