Energy regulator unveils price cap plans for 'vulnerable' households

Energy regulator unveils price cap plans for 'vulnerable' households

Energy regulator unveils price cap plans for 'vulnerable' households

These were in advance of Government efforts to cap, what Prime Minister Theresa May called, rip-off standard variable tariffs (SVTs) - a default price for electricity and gas that is often the most expensive.

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.

If passed, the proposed legislation would force regulator Ofgem to impose an "absolute cap" as soon as possible.

They argue intervention in the market does not promote competition.

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The cap will apply to about 18mln accounts that use standard variable tariffs at least until 2020, and possibly be extended to 2023 if deemed necessary, under draft legislation to be laid out by the government later today.

At present about 18 million customers are on some form of default tariff, which can cost hundreds of pounds a year more than the cheapest deals.

The bill will be published about mid-morning on Thursday, with the business secretary, Greg Clark, due to to make a statement in the House of Commons.

Around two-thirds of energy customers in Britain are on those tariffs, i.e. 18 million customer accounts - four million of which are on prepayment meters and are now protected by a price cap.

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But after 192 MPs of all parties wrote to the PM in September complaining that poorer customers were being preyed on by energy firms, Mrs May revived the plan and backed a price cap in her recent Tory conference speech.

Four million of those are on pre-payment meters.

The Government says it welcomes Ofgem's move, but claims the regulator could go further to protect everyone on default tariffs from unfair practices.

"Given the sharp reductions in share prices of Centrica and negative impacts on other retailers in the last two weeks, we believe this news is largely discounted in share prices in the near term, though it removes any hope people may have had that Ofgem would oppose application of a more general cap", Deutsche Bank said, issuing a "sell" rating and target price of 160p. "While five million households will see their bills capped from this winter, I want to see every household protected from rip off bills".

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