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. 

The default tariff cap came into force on 1 January 2019. We will update the level of the cap in line with our planned update schedule:

  • For the cap period commencing 1 April of each year, we will announce no later than the 5th working day in February
  • For the cap period commencing 1 October of each year, we will announce no later than the 5th working day in August.

On 7 February 2019, we updated the level of the default tariff cap in line with our planned update schedule. This will take effect from 1 April 2019, for the second cap period. The next update will be announced on the 5th working day of August 2019, taking effect from 1 October 2019.

When can customers benefit?

The default tariff cap came into force from 1 January 2019.

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. Since 1 Januaary 2019, these consumers are instead be protected by the default tariff cap. Domestic prepayment customers with a fully interoperable smart meter are also covered by the default tariff cap from 1 January 2019.

Next steps

The default tariff cap has been in place since 1 January 2019. We will continue to update the level of the default tariff cap over time to reflect changes in the cost of supplying energy, as per the planned update schedule set out above.

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: 21st Mar 2019
  • Decisions
  • 2 Associated documents
See our decision to issue Green Energy UK Limited an extension to the temporary derogation for renewable Standard Variable Tariffs from the Default Tariff Cap.

  • Published: 21st Mar 2019
  • Decisions
  • 2 Associated documents
See our decision to issue Good Energy Limited and Good Energy Gas Limited an extension to the temporary derogation for renewable Standard Variable Tariffs from the Default Tariff Cap.

  • Published: 21st Mar 2019
  • Decisions
  • 2 Associated documents
See our decision to issue The Renewable Energy Company Limited (Ecotricity) an extension to the temporary derogation for renewable Standard Variable Tariffs from the Default Tariff Cap.

  • Published: 14th Mar 2019
  • Open letters and correspondence
  • 1 Associated documents
This letter outlines our plans for reviewing smart metering costs to set the Smart Metering Net Cost Component in future default tariff cap periods.

  • Published: 7th Feb 2019
  • Open letters and correspondence
  • 10 Associated documents
Updated levels of the Default Tariff Cap and associated documents for the second charge restriction period (1 April 2019 – 30 September 2019).

  • Published: 7th Feb 2019
  • Decisions
  • 1 Associated documents
Decision to include a full Capacity Market allowance within the default tariff cap in the second cap period.

  • Published: 15th Jan 2019
  • Open letters and correspondence
  • 15 Associated documents
This letter outlines our approach to the capacity market calculations in the default tariff cap for the next price cap periods.

  • Published: 18th Dec 2018
  • Charts and data, Guidance
  • 2 Associated documents
View the energy price cap levels set for default energy tariffs (including standard variable tariffs), alongside worked examples of capped tariff calculations.

  • 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.

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