Government price cap to limit energy bills for 15m homes

Theresa May struggles with her glass of water after suffering a coughing fit whilst addressing the Conservative Party conference

Theresa May struggles with her glass of water after suffering a coughing fit whilst addressing the Conservative Party conference

Last week Theresa May announced plans to impose price caps for those customers on standard variable tariffs (SVT) - an energy suppliers "default" tariff.

But the law will expire in 2020, it was disclosed, with the potential for it to be extended for a further three years at most.

However, Ofgem said on Wednesday that it would have to wait for legislation to be in force before it could take action on standard variable tariffs.

Mrs May said: "I have been clear that our broken energy market has to change - it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much".

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Suppliers reacted with fury as billions of pounds were wiped off the value of their shares after the pledge.

The Government is expected to give more details of how that could work when it unveils new draft legislation on Thursday.

Under the bill, the regulator Ofgem would bring in a price cap on the poor value tariffs that exploit customer loyalty, which would protect around two-thirds of households and 18 million customer accounts, according to the Government.

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.

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In the meantime, we expect suppliers to do more to get customers on poor value default tariffs onto better deals.

The regulator's headline measure was that it was to extend price protection to one million more vulnerable customers this winter - saving them an average £120 - through its pre-payment safeguard tariff.

The Government's plan to provide price protection to all households on default deals will reassure them that the price they pay reflects the underlying costs of supplying their energy. This is created to build cross-party consensus on how the price cap will work.

To help with this, Ofgem is introducing new rules today to allow suppliers to roll customers coming to the end of their contracts onto another fixed deal instead of a poor value standard variable tariff. "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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