The government has confirmed that the domestic gas and electricity (Tariff Cap) bill has received royal assent. The bill will impose a temporary cap on the price of all default tariffs in the energy market until at least 2020.
Commenting on the announcement Gillian Guy, Chief Executive at Citizens Advice, said “The energy price cap will make a real difference to people’s lives. Capping prices for the 12 million people stuck on standard variable tariffs will stop firms overcharging customers who don’t or can’t switch supplier. Loyal customers have paid over the odds for too long. The passage of this bill should mean the cap is in place for winter, giving much-needed protection to households across Great Britain.”
“While the cap is a significant step towards a better energy market for consumers, it is also important that price protections remain in place for vulnerable people once the cap is lifted.”
Energy Secretary Greg Clark said: “This Bill, which delivers on our manifesto promise, is a necessary intervention to protect millions of energy customers who have been stuck on poor value deals and hit by unjustified price rises for far too long.cSwitching will always save people money, but that doesn’t mean that customers should be punished for their loyalty.”
Peter Earl, Head of Energy at Compare The Market, said “It is clear that the alleged annual savings of the energy price cap enjoys widespread support from UK households struggling with the high cost of energy via standard variable tariffs. More than three quarters (77%) of UK adults we asked are in favour of the price cap. We believe passionately that no one should be stuck on poor value tariffs and it is right that the government is trying to protect those at the sharp end of rip off energy prices. However, the price cap is only a sticking plaster and will not repair the fundamental failings within the energy market. The best way to drive down prices is to increase competition through switching. There are still not enough UK households switching energy suppliers on a regular basis, with only 16% regularly switching supplier. 29% have still never switched supplier!”
“The biggest danger of the price cap is that it will lull people into thinking that they never have to engage with their energy provider again. More than a fifth (22%) of those we asked say that the introduction of a price cap would result in them being less likely to switch provider. This is something which we must guard against. 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.”
“There is a degree of concern amongst the public that the price cap will make energy more expensive. The majority (52%) of UK adults are of the opinion that the average cost of energy will increase post price cap. This highlights the threat that energy companies will have to raise the prices of their best value tariffs in order to offset the revenue lost through the price cap on their standard variable, or other default tariffs. Ultimately, we are concerned that actively engaged energy shoppers will be negatively impacted, paying an inertia tax on behalf of those households stuck on standard variable tariffs and this may well be an unintended consequence of this initiative.”