Energy cap could cost households £200

HOUSEHOLDERS could be left more than £200 a year out of pocket, as the energy regulator has admitted a cap on bills that comes into force today could mean fewer customers shop around for a better deal.

The cap, which applies to the default energy tariffs paid by consumers after any fixed-rate period comes to an end, prevents suppliers charging the average household more than £1,137 a year.

Ofgem said the cap will help the 11million households who have stayed loyal to their suppliers and been moved to more expensive default tariffs.

But the regulator’s own impact assessments suggest that the cap could mean up to a third fewer consumers move between firms to try to save money.

The cheapest deal on the market is still significantly below the level of the cap. According to comparethemarket. com, the price comparison website, the average consumer who switches supplier pays £921 per year, £216 less than loyal customers who pay a rate equivalent to the cap.

Peter Earl, energy expert for the site, said: “We remain concerned that the price cap will create a false sense of saving and protection. More worrying perhaps is that it will also encourage inertia. The reality is that shopping around and moving to the best fixed price deal remains the only effective way of making significant savings and keeping your bills low.”

Research suggests that one in five households would be less likely to switch following the introduction of the cap. Consumer watchdogs also warned that the cap’s introduction could mean cash-strapped energy firms pull their cheapest deals from the market.

The cap will remain in place until at least the end of 2020, while work to make the industry fairer is carried out, and can be increased every six months in line with rising costs for suppliers.

Theresa May, the Prime Minister,

said: “Our energy price cap will cut bills for millions of families and people across the UK who have been ripped off by energy companies for too long.

“From today money will go back into the pockets of loyal consumers, including the elderly and those on lower incomes who feel the pinch more acutely.

“But work to tackle this issue doesn’t stop there. We’re working with regulators and industry to ensure that consumers are not unfairly overcharged in the future – whether on their phone bills or their insurance premiums.”

Claire Perry, the energy minister, said the price cap’s introduction showed the Government was delivering on its promises, but said switching supplier is still the best way to save money.

“Bill payers can now be confident that any change to the price cap will be a fair representation of the actual costs of energy, rather than suppliers passing on inefficiencies to their customers or as excess profits,” she said.

An Ofgem spokesman admitted that it expected fewer people to switch suppliers but said it was working on a number of ways to make switching “easier, faster and more reliable”.

He added: “Even when the proposed price cap is in place, we expect there will continue to be good value deals on

‘We warned this could have consequences, including damaging choice and competition for customers’

the market allowing customers to save even more money, while those who do not want to switch will be protected.”

A spokesman for Energy UK, the industry trade body, said the price cap was an additional challenge for firms which last year were hit by increases of around 30 per cent to the underlying cost of energy.

A spokesman said: “We warned this could have unintended consequences, including damaging choice and competition for customers.”