Ofgem on course to cap poor value energy deals by end of 2018

Publication date
6th March 2018
Information types
Policy areas
  • Ofgem set to cap energy bills of 12 million more households by the end of the year 
  • Legislation needs to be passed by Parliament this summer to make this happen
  • Ofgem is already protecting 5 million households, including some of the most vulnerable, from being overcharged

Ofgem has today outlined its commitment to cap the energy bills of millions of households on poor value default deals by the end of 2018 if legislation is passed this summer.

The price cap, outlined in government legislation unveiled last week, will protect these people from being overcharged for their energy. 

Around 12 million households are currently on poor value default deals, paying as much as £300 more than those on the cheapest tariffs.

Many of these households have never switched, or have not done so for years. 

On February 26, the government introduced the Domestic Gas and Electricity (Tariff Cap) Bill before Parliament.

The Bill set out the proposed new statutory role for Ofgem, as the energy regulator, to deliver a price cap for all consumers on default tariffs, including standard variable tariffs.  

In a letter to stakeholders, Ofgem has today committed to put the cap in place by the end of the year, provided that legislation is passed as expected before Parliament rises for the summer recess. 

Once this happens, Ofgem will publish a statutory consultation and draft license conditions for suppliers this summer.

Ofgem will then set the level of the cap, based on the latest estimates of energy costs, in the autumn. 

Following a brief implementation period for suppliers, the cap should be in place by the end of the year. 

Ofgem will be publishing a series of working papers over the next few months, outlining its approach to setting the default tariff cap. The first paper will be published this week.

Ofgem is already protecting over 5 million households from being overcharged after extending the prepayment meter safeguard tariff to almost 1 million more vulnerable consumers last month. 

Ofgem is working on contingency plans to extend this protection to a further 2 million customers next winter in the unlikely event that legislation for the wider price cap on default tariffs is delayed. 

These vulnerable customers will be covered by the wider cap once it is in place.

Dermot Nolan, chief executive of Ofgem, said: “Ofgem is on course to cap energy prices for millions more consumers who are being overcharged by the end of this year once legislation is passed this summer.

“Ofgem is working with the government to implement the price cap and will ensure that consumers, particularly the vulnerable, get price protection as soon as possible.”

Ofgem is also working to make switching easier, quicker and more reliable to help more people save money, particularly those on the worst deals, and last month launched the first-ever “simplified” collective switch.

Notes to editors

  1. Ofgem intends to bring the default tariff cap into effect by the end of 2018, in line with the intention of the Bill as soon as practicable following Royal Assent. The timeframe for implementation would include the statutory requirements both to consult on the change for at least 28 days and to allow a 56 day period between publishing Ofgem’s final decision and the license condition changes taking effect.
  2. In December 2017, Ofgem published its decision to extend the prepayment meter safeguard tariff to 1 million more consumers on standard variable tariffs receiving the Warm Home Discount. 
  3. Ofgem also consulted in December 2017 about extending the safeguard tariff to a further 2 million vulnerable consumers in time for next winter, protecting prices for 7 million consumers in total. Ofgem will continue to develop this extension of the safeguard tariff in parallel with its work on the default tariff cap. Ofgem is publishing the responses to this consultation today and a summary of the consultation responses.
  4. As of 28 January 2018, the cheapest dual fuel deal on the market was £820 per year, and the average standard variable tariff on offer from one of the six larger suppliers was £1,135 per year. Please see the price comparison indicator on our website
  5. As of October 2017, 57% of non-prepayment meter domestic customer accounts (approximately 13 million are on standard variable tariffs. These figures refer to data for the 10 largest suppliers and are based on the latest data submitted by suppliers. For an explanation of the methodology please see the non-prepayment domestic customer account indicator on our website
  6. Ofgem announced on February 12 that it is launching reforms to help more people switch supplier. This includes trialling “simplified” collective switching, trialling offering cheaper deals by letter or email, and launching a programme that will allow consumers to switch by the end of the next working day.

Further information for media

For further information, contact:

Kieran Lowe: 0207 901 7108

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About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem’s work, see Energy facts and figures or visit the Ofgem Data Portal

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