Default tariff cap

On 19 July 2018, the Domestic Gas and Electricity (Tariff Cap) Act 2018 came into force. This legislation requires the introduction of a temporary tariff cap for customers on Standard Variable (SVT) and default tariffs (the ‘default tariff cap’). 

The legislation:

  • creates a new duty for Ofgem to design and implement the default tariff cap
  • places a duty on Ofgem to implement the price cap as soon as practical

On 6 November 2018, we published our decision to introduce the default tariff cap. This followed our consultation process which started in March 2018. All associated working papers, consultations and publications are published on this page. 

When can customers benefit?

The default tariff cap will be in place from 1 January 2019. (The period between our decision and the licence modifications taking effect is a statutory requirement).    

Our analysis estimates that 98% of SVT customers could see reductions in their bills once the default tariff cap is in effect. On an ongoing basis, the default tariff cap will ensure that customers will pay a fair price for their energy. Any price changes will reflect genuine changes in energy costs.  

Existing price protections

There is a separate temporary price protection for domestic customers with prepayment meters – the safeguard tariff or also referred to as “price cap”. This safeguard tariff was introduced following the Competition and Markets Authority’s investigation into the energy markets. You can find further information on this page: Prepayment meter safeguard tariff.

We extended this price protection in February 2018 to cover around 1 million vulnerable consumers in receipt of the Warm Home Discount. Once the default tariff cap is in place, these consumers will instead be protected by the default tariff cap. Domestic prepayment customers with a fully interoperable smart meter will be covered by the default tariff cap from 1 January 2019.

Next steps

The default tariff cap will be in place on 1 January 2019. We will update the level of the default tariff cap over time to reflect changes in the cost of supplying energy. The first update will take effect from 1 April 2019. We will then update the default tariff cap every six months.

The default tariff cap will be in place until at least the end of 2020. The government will decide whether to extend the cap beyond this, up to a maximum of 2023. We will continue to monitor the energy market closely while the default tariff cap is in place, and will produce an annual report on the competitiveness of the energy market.

If you have questions, please contact us at retailpriceregulation@ofgem.gov.uk

 

 

 

Publications and updates

  • Published: 6th Nov 2018
  • Decisions
  • 23 Associated documents
Our decision on the methodology to implement a Default Tariff Cap and the associated Licence Conditions.

  • Published: 6th Nov 2018
  • Guidance
  • 4 Associated documents
This document sets out guidance on requesting a derogation from the default tariff cap for renewable tariffs. We are also publishing the derogation application form and cost sheets that needed to be completed to apply for a derogation.

  • Published: 5th Oct 2018
  • Agendas, minutes and presentations
  • 2 Associated documents
The presentation and Q&A from the webinars on the minded to position held on the 27 September 2018.

  • Published: 17th Sep 2018
  • Open letters and correspondence
  • 4 Associated documents
Ofgem is running a Disclsoure Room as part of our Statutory Consultation on the Default Tariff Cap. The attached documents detail the process for access.

  • Published: 6th Sep 2018
  • Closed: 8th Oct 2018
  • Consultations and responses
  • 63 Associated documents
A statutory consultation setting out our proposals on the methodology to implement a Default Tariff Cap and the associated Licence Conditions.

  • Published: 29th Aug 2018
  • Open letters and correspondence
  • 1 Associated documents
Default Tariff Cap: Further information statutory consultation and notice of intent to open a Disclosure Room to allow review of data underlying the cap

  • Published: 16th Aug 2018
  • Open letters and correspondence
  • 1 Associated documents
This letter gives an update on the timetable for our statutory consultation on the government’s default tariff cap, and the associated licence conditions.

  • Published: 20th Jul 2018
  • Decisions, Open letters and correspondence
  • 1 Associated documents
This letter provides an update on our timetable for the default tariff cap and sets out our decision not to proceed with the vulnerable safeguard tariff.

  • Published: 15th Jun 2018
  • Agendas, minutes and presentations
  • 0 Associated documents
Ofgem is seeking feedback from smaller suppliers on developing a design for price protection for consumers on standard variable and default tariffs.

  • Published: 15th Jun 2018
  • Closed: 29th Jun 2018
  • Consultations and responses
  • 8 Associated documents
An early sight of the draft licence conditions for how we may implement the default tariff cap and separate documents providing an initial view of the annexes.

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