Economy

Energy cap: Gas and electricity bills to be CAPPED in UK

Energy cap: Gas and electricity bills to be CAPPED in UK

More than 11 million households will save a combined £1 billion a year under plans to cap rip-off gas and electricity tariffs at £1,136, the energy watchdog has announced.

Dermot Nolan, the chief executive of Ofgem, said the price cap will allow the regulator to put in place further reforms to make the energy market "more competitive and work better for all consumers, including making switching energy supplier easier, quicker and more reliable".

They have tried to cut the number of customers on that tariff but at the same time raised prices since the government said it aimed to cap prices.

This will force them to scrap excess charges for people on poor value default deals and save millions of customers money every year.

The regulator, Ofgem, said it would review the price cap twice a year until 2023, by which time it aims to have introduced measures that would increase competition in the United Kingdom electricity and gas markets.

The watchdog suggested that many consumers on default tariffs use more energy than a typical household, so their savings would be higher.

A typical consumer on the most expensive tariffs would save over £120.

"There are over 100 tariffs available right now which are cheaper than the proposed level of the price cap at £1,136".

The price cap applies to the so-called standard variable tariff (SVT), the most popular type of rate offered by the big six energy suppliers, as well as other default deals.

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"The price cap is created to be a temporary measure, in place until 2023 at the latest", the watchdog said.

"If costs increase, Ofgem will ensure any rise will be due to genuine increases in energy costs rather than supplier profiteering", he said.

But Stephen Murray, energy expert at MoneySuperMarket, says households will be better off switching to save money than relying on the cap to give them a fair deal.

No, the Energy Price Cap will be reviewed by Ofgem twice a year (April and October) to reflect the latest estimated costs of supplying gas and electricity.

The price cap is created to be a temporary measure, in place until 2023 at the latest.

Iberdrola SA's Scottish Power and Innogy SE's Npower, which have the most expensive SVTs according to price comparison website MoneySuperMarket, will be hit harder than their United Kingdom peers.

Responding to today's announcement, chief executive of Energy UK Lawrence Slade, said: "There are over 70 suppliers in the energy market who will now be assessing how this impacts their individual business, however for many suppliers this will pose a significant challenge".

Peter Earl, head of energy at Comparethemarket.com, said the move was only a temporary "sticking plaster".


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