Quote Ref: WS1

Government introduces new price cap on energy tariffs

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The Government has introduced new legislation to cap prices on poor value energy tariffs in time for next winter - guaranteeing protection for 11 million households currently on the highest energy tariffs, as well as the 5 million vulnerable households already protected by the independent regulator Ofgem’s safeguard cap. 

The Department for Business, Energy and Industrial Strategy introduced the new price cap on power to Parliament at the end of February. This is one of a number of measures from the Government designed to save people money on their bills - currently some consumers are paying up to £300 more than they need to - including smart meters and faster switching.

The Domestic Gas and Electricity (Tariff Cap) Bill will put in place a requirement on Ofgem to cap energy tariffs until 2020 with hopes it will be implemented in time for next winter.

Prime Minister Theresa May said: “It’s often older people or those on low incomes who are stuck on rip-off energy tariffs, so today we are introducing legislation to force energy companies to change their ways.

“Our energy price cap will cut bills for millions of families. This is another step we are taking to help people make ends meet as we build a country that works for everyone.”

In setting the cap – which should reflect the interests of both energy suppliers and consumers - Ofgem will need to take into account the need to: 

  • create incentives for suppliers to improve efficiency;
  • set the cap at a level that enables suppliers to compete effectively for supply contracts;
  • maintain incentives for customers to switch;
  • ensure that efficient suppliers are able to finance their supply activities;
  • review the level the cap is set at every six months while it is in place.

The cap will be in place until 2020 when Ofgem will recommend to government whether it should be extended on an annual basis up to 2023.

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