Energy price cap: Government to introduce legislation to limit how much power firms can charge

Bill will 'force energy companies to change their ways', says Theresa May

Harriet Agerholm
Monday 26 February 2018 01:04 GMT
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The idea of energy price freezes was floated by then-Labour leader Ed Miliband in 2013 amid concerns over price hikes, and was criticised by Conservatives at the time
The idea of energy price freezes was floated by then-Labour leader Ed Miliband in 2013 amid concerns over price hikes, and was criticised by Conservatives at the time

A bill introducing an energy cap for 11 million households across Britain will be introduced to Parliament today.

The Government claims the Domestic Gas and Electricity Bill, which will allow the regulator Ofgem to limit tariffs until 2020, could save people up to £100 a year.

Theresa May said the bill would “force energy companies to change their ways”.

A 2016 report by the Competition and Markets Authority found consumers were paying around £1.4bn a year in excessive fees charged by the six largest energy company’s standard variable tariffs (SVTs).

Announcing the bill, which the Government hopes will come into force before next winter, Ms 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.”

The idea of energy price freezes was floated by then-Labour leader Ed Miliband in 2013 amid concerns over price hikes, and was criticised by Conservatives at the time.

Plans for a universal price cap were announced in the Conservative manifesto last year, but after the election Ms May passed responsibility to Ofgem, which faced criticism for only coming up with proposals to protect the most vulnerable.

At the Tory conference in October, the Prime Minister announced legislation to rein in “rip-off” bills in her speech.

Business and Energy Secretary Greg Clark said the savings from the new law would chip at the £1.4bn over-payments.

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.

A cap on the amount suppliers can charge per unit of energy had already been introduced in April 2017 for four million consumers with domestic prepayment meters in their homes.

On February 2, this was extended to a further one million households receiving the Government’s Warm Homes discount, which is targeted at vulnerable consumers, such as pensioners.

Gillian Guy, chief executive of Citizens Advice, said the Bill was “a significant step towards an energy market that works for everyone”.

She added: “Millions of loyal energy customers have been ripped off by their suppliers for too long.

“It’s essential that protections from overcharging remain in place for vulnerable energy customers after the cap is lifted.

“We look forward to working with the Government to ensure that consumers in vulnerable situations are protected in the long term.”

Lawrence Slade, chief executive of Energy UK, which represents power companies, said: “It’s vital the cap doesn’t halt the growth of competition which is helping customers to find a better deal and save on their energy bills.

“It’s also important that the cap accurately reflects suppliers’ costs, most of which are out of their direct control.”

Press Association contributed to this report

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