An energy price cap proposed by Ofgem is expected to save UK households an average of around £75 a year.
Around 11 million households on poor value default deals are to see the savings, with the cap at £1,136 per year for a “typical” dual fuel customer paying by direct debit.
It will be confirmed in November and come into effect towards the end of December.
Poses a significant challenge
Energy UK’s Chief Executive Lawrence Slade said: “There are over 70 suppliers in the energy market who will now be assessing how this impacts their individual business, however for many suppliers this will pose a significant challenge.
“It is crucial that the cap ensures we have an investible energy sector where efficient and financially robust companies can trade and innovation and engagement can continue to flourish and deliver benefits for consumers.”
Serves no purpose
Jane Lucy, CEO and Founder of The Labrador, said “The overall solution is defunct for the problem at hand. This is an acutely uncompetitive arena and ring-fencing price caps within this stagnant sector serves no real purpose.
“To ensure that consumers save money, the only true tool that can really deliver on this is auto switching. The government needs to make sure that customers have all the information and capabilities to switch to a cheaper tariff without needing to rely on the consumer’s actions to secure this.”
Households should be under no illusion of protection
Richard Neudegg, Head of Regulation at uSwitch.com, says: “Ofgem is playing a dangerous game by saying that customers will always be paying a ‘fair’ price for their energy under this cap. £1,136 a year is still almost £300 more expensive than the cheapest deal on the market.
“Customers are being sold a cap trap under the guise of a silver bullet. Rather than tackling the very real challenges faced by vulnerable households, this price cap condemns energy customers to more of the same – high bills, poor service and suppliers resting on their laurels.”
Only a temporary fix
Alex Neill, Which? Managing Director of Home Products and Services, said: “While this cap may bring a price cut for some, people shouldn’t think it will mean they’re automatically getting the cheapest deal on the market.
“There are still better deals on the market and energy companies must not use the cap as an excuse to delay helping the millions of customers stuck on rip-off standard variable tariffs to move.”
A welcome step forward
Lily Green, Campaign Manager at auto-switching service Look After My Bills, said: “It’s great to see the energy price cap is finally becoming a reality. Millions of people have been paying through the nose on Big Six rip-off standard tariffs for far too long.
“This is a welcome step to protecting vulnerable customers from Big Six exploitation. We believe the price cap is an urgent solution to a problem which stretches over many years.”