May's energy price cap will cover about two-thirds of households

May's energy price cap will cover about two-thirds of households

Ofgem will consult on the design of the safeguard tariff for default deals while the Government's draft bill progresses through Parliament.

Ofgem said on Wednesday that whatever was contained in the upcoming legislation, the government's price cap would not come into effect for the upcoming winter.

"I have been clear that our broken energy market has to change - it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much", said May.

The Prime Minister pledged to cap energy prices during her Conservative party conference speech, saying she would bring an end "to rip off energy prices once and for all".

Ofgem said it will work with the government to ensure that those on standard variable and other default tariffs receive price protection as soon as possible "if legislation is in place".

They argue intervention in the market does not promote competition.

The Government said it welcomed the action by Ofgem but believed this could go further to protect everyone on default tariffs "from the unfair practices now seen in the market affecting two-thirds of households in Great Britain".

"This draft bill. requires Ofgem to modify the standard license conditions for gas and electricity suppliers, so as to include conditions that impose a price cap for standard variable tariffs and default tariffs offered to domestic customers", explanatory notes accompanying the legislation said.

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Alex Neill, Which? managing director of home products and services, said: "For millions of consumers anxious about their energy bills, a cap might sound like a positive move".

The energy regulator has urged household suppliers to help move customers onto better value deals, as it moves to banish default tariffs.

Speaking in the Commons, Business Secretary Greg Clark said the bill would "preserve the ability for the market to act competitively" and "allow for effective competition and to give a reason for people to shop around".

Around two-thirds of all energy customers in the United Kingdom are now on these variable tariffs. It's great that we're moving on to think about how, rather than if, we make it happen.

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The regulator is also working on plans to extend its price protection plan to a further 2 million vulnerable households by next winter, but Nolan said this would be dependent on the timing of the government's legislation.

"As we have made clear, we believe standard variable tariffs (SVTs) have had their day". Customers are still likely to be better off by searching and switching themselves. She said her center-right government was trying to fix a market that punishes customers for their loyalty to a supplier.

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