- Ofgem’s prepayment safeguard tariff will initially be extended to 1 million more vulnerable households this winter
- Ofgem will work alongside Government to provide price protection to all standard tariff customers as soon as possible if legislation is passed
- Suppliers urged to act now to move customers onto better value deals
Around 1 million households will save £120 a year on average when Ofgem extends its prepayment safeguard tariff for more vulnerable people this winter.1
Ofgem will work on extending price protection to at least a further 2 million vulnerable households for winter next year once the timing of the Government’s price cap is confirmed.
Following the Prime Minister’s announcement last week, Ofgem will work with the Government so that all those on standard variable and other default tariffs receive price protection as soon as possible if legislation is in place.
The Government’s plan to provide price protection to all households on default deals will reassure them that the price they pay reflects the underlying costs of supplying their energy.
People will be able to save even more money by switching to a better deal.
Ofgem will consult on the design of the safeguard tariff for default deals while the Government’s draft bill progresses through Parliament.2
In the meantime, suppliers must step up efforts to get more of their customers on default tariffs onto better value deals.
Some suppliers have recently come forward with proposals to do so but more action is required.
To help with this, Ofgem is introducing new rules today to allow suppliers to roll customers coming to the end of their contracts onto another fixed deal instead of a poor value standard variable tariff.
Ofgem will be carefully monitoring to ensure any new default deals do not become another way to penalise customers who rarely switch.3
Under a separate initiative to boost confidence in the switching process, Ofgem is proposing that consumers would receive automatic compensation if their switch goes wrong.
Ofgem is continuing work to implement the remedies put forward by the Competition and Markets Authority last year to make it easier for people to engage in the market.
Dermot Nolan, chief executive of Ofgem, said: “Ofgem shares the Government’s concern that the energy market is not working for all consumers and is determined to reduce the detriment suffered by those overpaying for their energy, particularly those who are vulnerable.
“The Government’s proposed bill to provide price protection to those who remain on poor value default deals, such as the standard variable tariff, will give these households peace of mind about the price they pay for their energy.
“In the meantime, we expect suppliers to do more to get customers on poor value default tariffs onto better deals.
“We also expect suppliers to co-operate when Ofgem initially introduces a safeguard tariff for around 1 million vulnerable households this winter.
“The introduction of further price protections will give time for Ofgem’s reforms to work and for smart meters to be rolled out across the country as we move towards a smarter, fairer, more competitive market.”
Notes to editors
- See documents published today for details.
- Safeguard tariffs (also described as “price caps”) limit how much a supplier can charge a customer per unit of energy. These are set based on a broad estimate of how much it costs an efficient supplier to provide electricity and gas to certain groups of customers. The costs include the cost of wholesale energy, network charges, inflation, and complying with government schemes. Suppliers are able to charge less than the safeguard tariff but no more. Ofgem introduced a safeguard tariff for over 4 million households on prepayment meters in April which initially saved many around £80 a year. For more information, see Energy plans: What is the prepayment meter price cap (or ‘safeguard tariff’)?
- Ofgem’s new rule requires suppliers rolling customers onto fixed default tariffs to ensure that these are not more expensive than its standard variable rate. See decision document published today.
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