Published: Sun, September 09, 2018
Money | By Ralph Mccoy

United Kingdom unveils energy price cap to help 11 million households

United Kingdom unveils energy price cap to help 11 million households

It will then be reviewed every six months until the end of 2020, when it can be extended until 2023.

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

Lawrence Slade, chief executive of Energy UK, the trade body for suppliers, 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".

SSE chief Alistair Phillips-Davies said the plan would "require the most careful scrutiny in the coming weeks".

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

'Our cap will protect 11 million households from poor value deals this winter in addition to the five million vulnerable customers already protected by the prepayment meter cap or safeguard tariff.

An influential committee of lawmakers called the energy market "broken" while Prime Minister Teresa May said the energy tariffs were a "rip-off".

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.

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'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.

Centrica said: "Since the announcement of the CMA investigation into the functioning of the United Kingdom energy market over four years ago, our focus has been on making proposals to improve the functioning of the market for the benefit of customers".

The industry watchdog's proposals would see energy suppliers being forced to cap their annual tariffs at £1,136 - a move that could save those on the worst deals up to £120 per year.

The price cap does include a clause insisting on "the need to maintain incentives for domestic customers to switch to different domestic supply contracts".

Ofgem said it is aiming to confirm the cap level in November in time for the price cap to come in at the end of the year, subject to the statutory consultation process.

By the time the price cap comes in Centrica will lose about 210 million pounds for its SVT customers, which should be "manageable", according to Ahmed Farman, an analyst at Jefferies in London.

And it's on this final point we'd like to look into in a little more detail, specifically because loveMONEY readers tend to be regular switchers in order to keep costs down.

Since the government announced the price cap utilities have been trying to retain customers by moving them off SVTs and onto alternatives.

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