An energy price cap is on the cards again, under new proposals from the market watchdog Ofgem.
The price cap is one of the plans suggested by the regulator in a bid to "protect vulnerable consumers as part of a wider programme to make sure all consumers get a better energy deal". The cap will come in the form of a "safeguard tariff", Ofgem said.
Other proposals unveiled today include:
- Changes to the rules for price comparison websites so that it's easier for customers to switch energy suppliers
- The trial of a new ‘Check Your Energy Deal’ online switching service to help customers who have been on poor value standard variable tariffs for three years or more to find cheaper deals
- A separate trial in which Ogem will test whether writing to customers about cheaper offers from rivals prompts them to shop around and switch.
Ofgem also wants to impose a cap of £150 on the amount suppliers can charge customers for installing a pre-payment meter under warrant and to ban these charges altogether for the most vulnerable.
Protecting vulnerable customers
The regulator has been trying for years to come up with a way to protect "vulnerable" customers from overpaying for gas and electricity. Last year, the Competition and Markets Authority (CMA) published the results of its investigation of the energy market, which it said revealed customers were paying £1.4bn more than they would in a fully competitive market.
In response to the CMA's findings, Ofgem set out plans for a price cap on bills paid via prepaid meters, and the creation of a database of "disengaged customers" to promote competition.
Priority for Ofgem
"Protecting vulnerable consumers is a priority for Ofgem. We are committed to ensuring that the more disadvantaged in society are not left behind as we move towards a smarter, more competitive energy market," Ofgem chief exec Dermot Nolan said today.
"That’s why we are starting new work to protect vulnerable customers, including the option of introducing a safeguard tariff for them.
"Suppliers must also do more to get all their consumers, particularly those on poor value standard variable tariffs, a better deal. We are pressing ahead with a raft of reforms to make it even easier for people to switch no matter how they choose to shop around."
In the run up to the General Election, Prime Minister Theresa May vowed to introduce a cap on standard variable energy tariffs to bring down prices.
The Queen's Speech did not mention the price cap, but said the government had "committed to extending the price protection currently in place for some vulnerable energy consumers to more of those on the poorest value tariffs", and energy secretary Greg Clark sent a letter to Ofgem urging the watchdog to "proceed without delay" in advising him on what action to take.