New energy bill cap considered

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A price cap on energy bills could be extended to many more households on low incomes, under plans being considered by regulator Ofgem.

A limit on the cost of gas and electricity for those on pre-payment meters already saves about four million people £80 a year.

This could be extended to others on certain benefits.

The proposals come after a much wider cap in the Conservative manifesto was absent from the Queen’s Speech.

Instead, the government said ministers were “considering the best way” to protect those on the poorest-value tariffs.

Business Secretary Greg Clark wrote to Ofgem to challenge the regulator to use its existing powers to reduce bills.

The announcement from Ofgem lists a range of proposals covering billing and switching.

Higher bills

Last year, a landmark investigation by the Competition and Markets Authority concluded that many households on standard variable tariffs were paying too much for their energy.

It calculated consumers were overpaying by up to £1.2bn a year.

This led to a cap – set regionally – on the cost of energy for those on pre-payments meters.

Five of the “big six” energy suppliers raised prices for other customers earlier this year, despite pressure not to do so. Ofgem said such rises were not justified.

The Conservative manifesto suggested the energy market was not working for consumers and, in a widely-debated move, suggested a tariff cap to protect 17 million people paying standard rates. This would have saved them up to £100 a year.

However, after the election, new legislation required for the cap was missing from its plans for the next two years.

Instead, it put the ball back in Ofgem’s court.

Now the regulator has said it will hold a summit in July with consumer groups on how it could extend the pre-payment meter cap to other households.

Citizens Advice has already suggested that two million extra households which receive the Warm Homes Discount should get the same protection, including some pensioners and families with young children.

Other Ofgem proposals include:

  • A trial that would allow households to enter only their postcode and current supplier into a “digital deal checker” to view the cheapest tariff
  • Requiring suppliers to inform customers of cheaper deals with rival companies, under a trial scheme
  • A clickable option on all price comparison websites to ensure customers see prices in the whole of the market, not just preferred suppliers
  • A cap on the charges levied when a pre-payment meter is installed under warrant.

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