Government publishes draft bill designed to put temporary cap on energy prices

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Government publishes draft bill designed to put temporary cap on energy prices

Author Lauren Howells

After promising to put a price cap on energy bills, in what was described as the Prime Minister’s “latest u-turn”, the Government has published its draft legislation designed to place a temporary cap on energy prices.

The draft bill includes measures that would limit the cost of standard variable tariffs, as well as various other default tariffs that customers are moved onto at the end of their fixed-term deal.

The government says that around two-thirds of energy customers in Great Britain are currently on this type of tariff, accounting for around 18 million customer accounts. However, 4 million of these customers are already protected by a price cap, as they are on pre-payment meters.

Cap on energy prices may not take effect until start of 2019

According to the Guardian, analysts think that the cap may not take effect until, at the very earliest, the beginning of 2019, due to the legislative process.

The government has said that, under the proposed legislation, the cap would be a temporary measure and would run until 2020. However, Ofgem, the independent regulator, could recommend to extend it on an annual basis, until 2023, at which point it would expire.

Cap on energy prices could save people up to £100 a year

cap on energy prices

Photo by Janie Hernandez

The Conservatives have reportedly claimed that this cap could save people up to £100 a year.

Theresa May said:

“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. Today’s publication of draft legislation is a vital step towards fixing that, and in offering crucial peace of mind for ordinary working families all over the country.”

Ofgem announced it was extending its prepayment safeguard tariff this winter

Earlier this week, Ofgem announced that it was extending its prepayment safeguard tariff to around 1 million more vulnerable households this winter, saving them on average £120 a year.

The government has said that this would mean a total of 5 million people will be protected by price caps this winter. The regulator says that it is working on extending price protection to at least another 2 million vulnerable households for next winter “once the timing of the Government’s price cap is confirmed”.

Dermot Nolan, chief executive of Ofgem, said: “The Government’s proposed bill to provide price protection to those who remain on poor value default deals, such as the standard variable tariff, will give these households peace of mind about the price they pay for their energy. 

“In the meantime, we expect suppliers to do more to get customers on poor value default tariffs onto better deals.”

Regulator proposing automatic compensation for consumers if switch goes wrong

Ofgem also announced that it is proposing automatic compensation for consumers if their switch goes wrong.

Speaking about the draft price cap bill, Business and Energy Secretary Greg Clark said:

“People who show loyalty to well-known brands are paying hundreds of pounds a year too much on standard variable tariffs and I am determined that this practice should end.”

By | 2017-10-13T09:41:27+00:00 October 13th, 2017|Business, Economy|0 Comments

About the Author:

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After completing her law degree, Lauren decided to follow her passion for writing. She regularly contributes articles to CLNews on personal finance and general consumer topics.

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