Ofgem has proposed price caps that it says would save the average household on a default tariff £75 per year. “In total, the price cap would save consumers around £1 billion,” said the regulator.
It believes companies who serve the 11 million households on default tariffs should not charge more than £1136 per year for a typical dual fuel customer paying by direct debit.
The exact savings each individual household would make will depend on the price of their current deal, how much energy they use, whether they have both gas and electricity and how they pay for their energy. The regulator says a typical consumer on the most expensive tariffs would save over £120. It is aiming to confirm the cap level in November, for it to come in at the end of the year.
The price cap is designed to be a temporary measure, in place until 2023 at the latest. Ofgem will update the level of the cap in April and October every year to reflect the latest estimated costs of supplying electricity and gas. Ofgem says it will meanwhile put in place further reforms to make the energy market more competitive and work better for all consumers, including making switching energy supplier easier, quicker and more reliable.
The proposed average level of the default tariff cap, and the typical standard variable tariff savings for direct debit and standard credit customers for the largest energy firms are as follows: