11million households will save £75 a year as the government’s energy price cap is revealed
MORE than 11million households on rip-off energy tariffs could be set for savings of £75 a year from this winter as the energy regulator has revealed details of a long-awaited price cap.
Under the plans, energy providers won't be able to charge dual fuel households more than £1,136 a year.
The cap is due to take force by the end of the year - subject to approval.
Ofgem was given the power to set a price cap under a new law put in place in July.
The cap will apply to customers who are put onto expensive default tariffs by their energy providers.
Customers are moved onto these tariffs when their cheaper deals come to an end or if they've never changed providers.
How does the price cap work?
REGULATOR Ofgem will be introducing a new energy price cap by the end of this year.
The cap is designed to protect consumers from paying rip-off energy charges.
It will cover standard variable and default energy tariffs - some of the most expensive around.
Around 12 million UK households are currently languishing on very expensive standard tariffs, usually after failing to switch when a fixed-term deal comes to and end.
The cap will be in place until at least 2023.
But that doesn't mean energy bills can't go up.
Every six months, the government will review the cap and determine how much energy providers can charge.
How much money each customer saves will depend on their gas and electric usage.
Ofgem reckons most people will save an average of £75 a year as a result of the cap, while those on the most expensive tariffs will save over £120 a year.
In total, the price cap will save consumers around £1billion, according to the regulator.
Ofgem said it will update the level of the cap each April and October to reflect the wholesale energy market.
The cap will only be temporary though, and will be in place until 2023 at the latest as the watchdog is working on further reforms to make the market work better for consumers.
It'll work alongside the regulator's existing price cap for five million vulnerable customers, which came into force in April 2017, and will rise to £1,136 a year from October.
The news will come as welcome relief to the millions of customers who have seen their energy bills go up.
All of the major providers have announced at least one price hike so far this year.
Dermot Nolan, chief executive of Ofgem, said: “Ofgem has made full use of the powers Parliament has given us to propose a tough price cap which will give a fairer deal to consumers on poor value default tariffs.
Once the price cap is in place, all households in Great Britain covered by the cap will be protected from being overcharged for their energy."
How to switch suppliers and save £300
SWITCHING suppliers is the best way you can cut your energy bills. But recent research from MoneySuperMarket found that households are throwing away up to £300 a year by not bothering. Here's what you need to do.
1. Shop around - If you're on an expensive Standard Variable Tariff (SVT) deal you are throwing away up to £300 a year. Use a comparison site such as MoneySuperMarket.com or EnergyHelpline.com to see what deals are available to you.
The cheapest tariffs are usually fixed deals - meaning you'll pay a fixed amount for a set period of time.
2. Switch - When you've found a tariff, all you have to do is contact the new supplier.
It helps to have the following information to hand - which you can find on your bill - to give the new supplier:
- Your postcode
- Name of your existing supplier
- Name of your existing deal and how much you pay
- An up-to-date meter reading
It will then notify your current supplier and begin the switch.
It should take no longer than three weeks to complete the switch and your supply won't be interrupted in that time.
For more advice read our guide on how to switch.
Greg Clark, the business and energy Secretary, added: "We have always been clear and determined that the injustice found by the Competition and Markets Authority that loyal customers were being exploited must end.
"This Government is delivering on its promise to end that injustice and protect households across the country from unjustified price rises."
Lawrence Slade, chief executive of trade body Energy UK commented: “There are over 70 suppliers in the energy market which will now be assessing how this impacts their individual business, however for many suppliers this will pose a significant challenge.
"It is crucial that the cap ensures we have an investible energy sector where efficient and financially robust companies can trade, and innovation and engagement can continue to flourish and deliver benefits for consumers."
But customers can save more cash by shopping around for the best deal and switching energy provider.
The cheapest deal currently on the market, for example, is £277 cheaper than Ofgem's price cap at £859 a year, according to comparison website uSwitch.
Richard Neudegg, the site's head of regulation, commented: “Ofgem is playing a dangerous game by saying that customers will always be paying a ‘fair’ price for their energy under this cap.
"£1,136 a year is still almost £300 more expensive than the cheapest deal on the market.
“Customers are being sold a cap trap under the guise of a silver bullet. Rather than tackling the very real challenges faced by vulnerable households, this price cap condemns energy 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."
Peter Earl, head of energy at comparison website Compare the Market added: "The biggest danger of the price cap is that it will lull people into thinking that they never have to engage with their energy provider again.
"More than a fifth (22%) of those we asked say that the introduction of a price cap would result in them being less likely to switch provider.
The Sun Says
TOO many politicians promise the Earth and deliver nothing — so we congratulate Greg Clark on the energy price cap that will save money for millions. It’s a big win for The Sun’s campaign too.
We don’t like urging Government interference in what should be free markets. But where they are rigged and broken, where greedy monopolies routinely rip off the public for essential services, we will make exceptions.
And if the Business Secretary follows through his threat to go after other profiteers whose business model relies on exploitation, we’ll back him.
What choice was there with the Big Six? They were repeatedly warned to stop their unjustified price hikes — and laughed in the Government’s face.
Yes, customers should switch supplier. But it’s not easy and many don’t, or can’t. They should not be treated as cashpoint machines by unscrupulous corporations.
The failing water and rail firms should be next. But the nationalisations Labour lazily clamour for are a recipe for shoddy service, strikes and crippling losses to taxpayers, as in the past. The answer is MORE privatisation, more competition.
Because these aren’t truly free markets. Until they are, firms enjoying effective monopolies should expect far greater Government scrutiny and action than those who genuinely compete.
“We’re in a different age now,” Mr Clark says. Good.
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"It is vital that the regulator, Ofgem, makes it very clear that the price cap is a temporary solution and that people will still most likely only get the best deals by shopping around for fixed tariffs."
Millions of Brits could save up to £300 a year by changing who supplies their gas and electricity.
You can also save cash on your electricity bills by cutting your usage with these simple steps.
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