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’).
- 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.
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.
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