UK energy firms face more price caps for poorer families

A price cap on energy bills for more low-income families has been announced by UK energy regulator Ofgem.

A cap for four million consumers on pre-payment meters announced earlier this year will be extended to two million extra people, saving £80 on their energy bills.

Ofgem has also announced plans to cap the charge for installing a pre-payment meter under warrant – where customers are not paying their bills – at £150, and to ban these charges altogether for the most vulnerable.

A ‘safeguard’ tariff could also be introduced for vulnerable consumers that would protect them from overpaying for their energy.

Paying too much

The move follows research that suggests vulnerable consumers get a bad deal. An investigation in 2016 by the Competition and Markets Authority found families on standard tariffs were, overall, paying £1.2bn per year too much.

Despite this, five of the biggest energy suppliers raised their prices earlier this year.

Shares in Centrica – owners of British Gas – and SSE, both listed on the London Stock Exchange, rose when the Ofgem report was unveiled this morning (July 3), suggesting investors had feared stiffer penalties. The other four big players – EDF, npower, E.On and Scottish Power – are all foreign owned.

Ofgem’s latest announcement will also take the hassle out of switching energy providers. While the number of switches is at a nine-year high, according to Ofgem’s latest data, many people think it’s too much hassle and have never or rarely switched.

Price comparison websites will now have to make it easier for people to switch to cheaper deals. Currently, users can’t switch directly to some of the cheapest deals listed and have to visit the supplier’s own site. Now they will be able to click straight through for all available deals.

'More action needed'

However, consumer group Which? questioned whether the reforms went far enough.

“Millions of hard-pressed customers are overpaying for their energy and suffering due to a lack of competition in the energy market,” said Alex Neill, Which? managing director of home products and services.

“More help for the most vulnerable customers and steps to make switching easier are welcome, but people will question whether these interventions are enough to deliver an energy market that finally works for all consumers.”

'Protecting vulnerable consumers'

Dermot Nolan, chief executive of Ofgem, said: “Protecting vulnerable consumers is a priority for Ofgem. We are committed to ensuring that the more disadvantaged in society are not left behind as we move towards a smarter, more competitive energy market.

“That’s why we are starting new work to protect vulnerable customers, including the option of introducing a safeguard tariff for them.

“Suppliers must also do more to get all their consumers, particularly those on poor value standard variable tariffs, a better deal. We are pressing ahead with a raft of reforms to make it even easier for people to switch no matter how they choose to shop around.”

Energy UK, which represents the big suppliers, said energy companies were committed to helping customers get the best deals.

“Switching levels continue to rise, with over two million consumers having already switched this year,” said chief executive Lawrence Slade.

"We are committed to working with the government and the regulator to deliver an energy market where competition continues to flourish, and which produces fair outcomes for all consumers, including better targeted support for the most vulnerable."