The energy regulator has announced plans to protect vulnerable customers through a price cap – falling short of Government threats for wider limits to prevent households over-paying.
Ofgem said it was mulling a “safeguard tariff” to limit bills for those deemed at financial risk to ensure they did not overpay for their energy.
Its key proposal will be seen as a victory for energy firms who had hit out at Conservative plans, ahead of the General Election, for a cap on the most expensive standard tariffs currently paid by 70% of UK households.
Such a move would have shaved £100 annually from those bills per customer.
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Shares in Centrica, the owner of British Gas, rose 1.4% in early trading while SSE gained 0.8% as Ofgem’s announcement was seen as confirmation the standard price cap was dead in the water. The measure was not in the Queen’s Speech.
The regulator’s proposals also included a £150 limit on the amount a supplier could charge for installing a pre-payment meter under warrant – usually when a customer cannot or will not pay their bill.
It said it wanted to scrap the charge completely for vulnerable customers – the two million on ‘Warm Home’ discounts.
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Wider reforms were aimed at helping all households ‘take the hassle’ out of switching.
The watchdog said that while switching rates were at a nine-year high, it wanted to change the rules to allow people to change supplier or tariff directly through a price comparison website.
Ofgem was also planning to trial a ‘check your energy deal’ online service and said it was already testing whether writing to customers, who were not online, about cheaper deals would have any impact.
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The plans were announced less than a fortnight after the Secretary of State for Business and Energy, Greg Clark, wrote to the regulator to outline his concerns about the domestic energy market.
Mr Clark said on Monday: “The Government has made clear its commitment to extending price protection to more energy customers on poor value tariffs.
“I note Ofgem’s response to my letter accepting the need to go further than the CMA (Competition and Market Authority) recommendations, in particular the need to extend the safeguard tariff as soon as possible.
“I now want to see this translated into action with suppliers playing their part in supporting Ofgem to deliver a fairer deal to customers on poor value tariffs.”
The announcement was made months after suppliers raised standard tariffs – citing higher costs.
Alex Neill, managing director of home products and services at the consumer group Which?, said: “Millions of hard-pressed customers are overpaying for their energy and suffering due to a lack of competition in the energy market.
“More help for the most vulnerable customers and steps to make switching easier are welcome, but people will question whether these interventions are enough to deliver an energy market that finally works for all consumers.”
Source: Sky News