Ofgem introduces price cap to help consumers save


Ofgem’s decision follows a report published by the Competition and Markets Authority (CMA) in June setting out ways in which the market could be improved for customers. [Ofgem fines E.ON for missing UK government’s smart meter target]

[quote] According to local news, the regulator said that it would work with “disengaged customers” who remain on expensive tariffs to shop around for better deals.

Ofgem chief executive, Dermot Nolan, said: “The CMA’s final report is a watershed moment for industry and consumers and points the way to a fairer and more competitive future. I call on energy companies and consumer groups to seize this opportunity.”

The organisation said that the meter cap will assist the “most vulnerable [customers] and least likely to switch”. Ofgem said that this will save customers around £75 April next year.

The price cap on gas and electricity will stay in place until 2020 when the introduction of smart meters, affording customers access to better deals, will be completed.

Consumer savings

Ofgem’s new charge will help four million of the poorest households in the UK save on their electricity bill – collectively, a total of £300 million will be slashed from UK home bills annually.

The Sunderland Echo noted that the Competition and Markets Authority (CMA) warned that “70% of people using the system were on a more expensive ‘default’ standard variable tariff, costing consumers £1.4 billion more than in a competitive market. [Smart prepaid meters: Ofgem’s plan to protect UK consumers]

“The cheapest plans were £260 to £320 more expensive than for people paying by direct debit because pre-payers face limited competition from suppliers and have less ability to switch and find better deals.”

From 2018, energy providers will be required to share customer data to allows competitors to offer customers better deals

A pilot scheme database will be launched that will allow competitors to offer domestic users on standard variable rates for three years or more better-value packages.

In 2017, Ofgem said it will also pilot a database service – allowing rival suppliers to offer better value deals to those who are on standard variable rates for three years or more.