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Ofgem commits to UK energy price cap by end of year
UK energy industry regulator Ofgem on Tuesday committed to implement a price cap on domestic bills by the end of the year, subject to legislation being passed this summer.
The regulator said it would publish a series of working papers over the next few months, outlining its approach to setting the default tariff cap, adding that the first paper would be published this week.
The government last week introduced the Domestic Gas & Electricity Bill to end what it called a "two tier market", where customers were effectively punished for not changing suppliers.
Ofgem said it would set its cap "as soon as practicable" following the Bill's Royal Assent.
The timeframe for implementation would include the legal requirements to consult on the change for at least 28 days and allow a 56 day period between publishing its final decision and the license condition changes taking effect.
Ofgem would then publish a statutory consultation and draft license conditions for suppliers this summer and subsequently set the level of the cap, based on the latest estimates of energy costs, in the autumn.
The regulator said it was also working on contingency plans to extend existing protection to those on pre-payment meters to a further two million customers next winter in case the legislation is delayed.
"As of 28 January 2018, the cheapest dual fuel deal on the market was £820 per year, and the average standard variable tariff on offer from one of the six larger suppliers was £1,135 per year," Ofgem said, adding that 57% of non-prepayment meter domestic customer accounts, or 13 million customers, were are on standard variable tariffs at October 2017.
MPs warned last month that a price cap should be introduced "urgently" to stop vulnerable customers on variable tariffs being ripped off.
The all party Business committee said the domestic energy market was "broken", with suppliers punishing loyalty to subsidise cheap deals for customers who switch regularly.
It concluded that the so-called "Big Six" suppliers had brought the introduction of a price cap on themselves by raising prices in 2017 and failing to take effective action on standard variable tariffs (SVTs).
Committee chair Rachel Reeves said a cap should be in place by next winter.
"The Big Six energy companies might whine and wail about the introduction of a price cap but they've been overcharging their customers on default and SVTs for years and their recent feeble efforts to move consumers off these tariffs has only served to highlight the need for this intervention," she said.
The UK's main six suppliers are SSE, Scottish Power, British Gas, E.ON, EDF and Npower.