Energy price cap to stop ‘rip offs’, but higher bills feared

CHEAP energy deals are expected to be axed later this year after the Government enforces its energy price cap, with experts warning that the move will end up penalising switchers.

Ofgem, the energy watchdog, yesterday announced proposals to cap the prices of gas and electricity. It said that the plans would save 11 million loyal customers £75 each on average.

The cap for a typical dual fuel customer paying by direct debit would be set at £1,136 a year, forcing suppliers to cut prices to that level or below.

The intervention was ordered by Theresa May, the Prime Minister, to protect vulnerable consumers who are less likely to shop around for cheap energy and are “ripped off ” as a result.

Ofgem said people on the costliest default standard variable tariffs will save more than £120 a year without having to do anything after the cap is introduced.

However, consumers who shop around for better deals are expected to find they stand to save less money.

The current gap between the cheapest and most expensive deal on the market is £482, but under current prices this will fall to around £300, according to switching service Uswitch.

Peter Earl, head of energy at Compare the Market, the comparison website, said: “There is concern that the cap will make energy more expensive.

“We are concerned that engaged shoppers will suffer, paying an inertia tax to subsidise households stuck on standard variable tariffs.”

Richard Neudegg, head of regulation at uswitch.com, said: “Rather than tackling the very real challenges faced by vulnerable households, this price cap condemns customers to more of the same – high bills, poor service and suppliers resting on their laurels.

“There’s a very real danger that customers will feel they can now stay put rather than vote with their feet – gravely damaging competition and guaranteeing that prices stay high for all.”

It is hoped that the cap will be in place by the end of the year.

Ofgem said it would adjust its level every April and October to ensure consumers “always pay a fair price”.

Claire Perry, an energy minister, said: “Today’s proposals by Ofgem are a step forward as this Government delivers an energy market that puts consumers at its heart.”