United Kingdom regulator sets energy price cap at 1,136 pounds a year

09 September, 2018, 06:47 | Author: Billie Castillo
  • The watchdog says it is looking to have the price cap in place by the end of the year. File image

"It is vital that the regulator, Ofgem, makes it very clear that the price cap is a temporary solution and that people will still most likely only get the best deals by shopping around for fixed tariffs".

A typical consumer on the most expensive tariffs would save over £120.

However consumer groups have warned that the decision is the "wrong message, at the worst possible time", warning that the cap could make consumers complacent and deter them from switching provider.

SSE chief Alistair Phillips-Davies said the plan would "require the most careful scrutiny in the coming weeks".

Since April, Scottish Gas owner British Gas has raised its price twice - adding a total £104 to the average bill.

If you are one of the 11 million now on one then you could save more money by moving to a different energy tariff.

Peter Earl, head of energy at Comparethemarket.com, said the move was only a temporary "sticking plaster".

"The price cap is created to be a temporary measure, in place until 2023 at the latest", the watchdog said.

Industry watchdog Ofgem is bringing in a price cap that will limit energy companies charging no more than £1,136 a year.

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The price cap does include a clause insisting on "the need to maintain incentives for domestic customers to switch to different domestic supply contracts".

Stephen Murray, energy expert at MoneySuperMarket, suggested there was an element of "political soundbite" to Ofgem's price cap announcement, and that the were already options in place for customers to save on energy bills now.

"Ofgem has made full use of the powers parliament has given us to propose a tough price cap which will give a fairer deal to consumers on poor value default tariffs", said the watchdog's chief executive Dermot Nolan.

Business and Energy Secretary Greg Clark said the cap will put a stop to the exploitation of loyal customers, saying the Government "is delivering on its promise to end that injustice and protect households across the country from unjustified price rises".

There are arguments both for and against an energy price cap and we've run opinion pieces on both (click the links to read these).

Nevertheless, the company reiterated its position that caps were not sustainable for the United Kingdom energy market. "This may be the great unintended effect of the price cap".

By the time the price cap comes in Centrica will lose about 210 million pounds for its SVT customers, which should be "manageable", according to Ahmed Farman, an analyst at Jefferies in London.

EON SE announced last month it would cut 500 U.K.jobs in Britain ahead of the squeeze on profits expected from the price cap.

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