18 million energy customers to see bills capped by government

Published by Adam Williams on 12 October 2017.
Last updated on 12 October 2017

Person flicking a plug switch

Plans to cap energy prices for millions of households have moved one step closer to reality as draft legislation has been published by the government.

The bill, which will need to be scrutinised by parliament before passing into law, proposes that caps would be applied to the standard variable tariffs offered by providers.

The cap would be a temporary measure, running until the end of 2020 at the latest. At that point the regulator Ofgem would conduct a review and examine the possibility of extending it for up to three more years.

This would apply to all domestic energy customers in England, Scotland and Wales.

The government has yet to clarify whether the cap will be an absolute cap – meaning consumers cannot be charged more than a set amount - or a relative cap, whereby the standard variable tariff must not be more expensive relative to fixed tariffs.

Around two-thirds of all energy customers in the UK are currently on these variable tariffs. This is equivalent to 18 million accounts, although four million customers with pre-payment meters and are already protected by a price cap.

The bill is unlikely to be passed through parliament this year, meaning households will have to wait until 2018 for any freeze to take effect.

‘Our broken energy market has to change’

Prime Minister Theresa May says: “I have been clear that our broken energy market has to change – it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much.

“Today’s publication of draft legislation is a vital step towards fixing that, and in offering crucial peace of mind for ordinary working families all over the country.”

Business and energy secretary Greg Clark adds: “People who show loyalty to well-known brands are paying hundreds of pounds a year too much on standard variable tariffs and I am determined that this practice should end.”

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If an increase was required

If an increase was required by the energy companies it would be imposed within a month, so what's the problem in reversing the procedure!