May's energy price cap will cover about two-thirds of households

May's energy price cap will cover about two-thirds of households

The government will today publish draft legislation to cap energy prices until at least 2020 in an effort to reduce bills for millions of households.

Britain said on Thursday it would ask the regulator Ofgem to devise a price cap for consumer energy tariffs, but did not provide any specific details on how the cap would work for suppliers trying to gauge the impact on their business.

More than 18 million customer accounts in Britain are now on a standard variable tariff or other default tariffs, many of which offer poor value to customers because they are priced higher than the fixed-rate deals available to consumers who actively seek them out.

Mrs May said: "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".

The regulator will, from February, protect a further one million households who receive the Warm Home Discount.

Ofgem will consult on the design of the safeguard tariff for default deals while the Government's draft bill progresses through Parliament.

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Peter Earl, head of energy at Comparethemarket, said a price cap would not fix the broken market. "While five million households will see their bills capped from this winter, I want to see every household protected from rip-off bills".

He added that the draft legislation would send a "clear message to suppliers they must act to put an end to loyal consumers being treated so unfairly".

Labour says the Government's proposed legislation does not go far enough.

"An absolute cap would throttle competition, be out of date as soon as the wholesale price of gas goes up or down, and energy firms would spend more time lunching their regulators than delighting their customers".

"For millions of consumers anxious about their energy bills, a cap might sound like a positive move", said Alex Neill, its managing director of home products and services.

Ofgem said that whatever was contained in the upcoming legislation, the government's price cap would not come into effect for the upcoming winter. While the price cap will benefit apathetic customers that don't switch, it is also likely to push up fixed prices at the lower end of the market as suppliers look to recoup earnings from their most profitable SVT customers.

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