Legislation to crack down on expensive energy tariffs will be introduced in Parliament later today (February 26), the Government has announced.
As reported by the BBC, Prime Minister Theresa May said the new price cap would protect 11 million people paying “rip-off” energy tariffs.
The Domestic Gas and Electricity (Tariff Cap) Bill
The Domestic Gas and Electricity (Tariff Cap) Bill will allow Ofgem to limit tariffs until 2020, with the option to extend the cap annually until 2023.
Theresa May said: “It’s often older people or those on low incomes who are stuck on rip-off energy tariffs, so today we are introducing legislation to force energy companies to change their ways.
“Our energy price cap will cut bills for millions of families. This is another step we are taking to help people make ends meet as we build a country that works for everyone.”
A 2016 report found consumers were paying on average of £1.4 billion a year over the odds via energy companies’ standard variable tariffs (SVTs).
Customers will save around £100 a year
The new cap will reportedly save customers around £100 a year on average, and the government say they intend for Ofgem to implement it before the end of the year so that “customers get the protection they need by next winter”.
In fact, the Business and Energy Department believes the average annual savings between standard tariffs and fixed rate deals could be up to £300.
Although the Conservatives initially criticised the idea of a price cap back in 2013, they announced plans for a universal price cap in their election manifesto last year and Theresa May announced legislation to rein in the “rip off” bills in her speech to the Tory conference in October.
The energy cap is separate from Ofgem’s safeguard tariff, which is already helping some five million vulnerable customers pay lower prices.
The key decision over what level the new cap will be set at will be made by Ofgem.
After 2020, Ofgem will recommend to the Government whether the caps should be extended on an annual basis to 2023. It will review the level the cap is set at every six months.