Around 11 million households across the UK will be protected from being overcharged on their energy bills thanks to an extension to the government’s Energy Price Cap until the end of next year.
The Energy Price Cap shields those least likely to shop around for the best deals – including the elderly and most vulnerable – from being charged excessive prices.
Since its introduction in January 2019, the cap has saved customers around £1 billion a year, equivalent to around £75-100 a year for typical households on default energy tariffs.
An additional 4 million households with prepayment meters on default tariffs will also come under the protection of the cap from January.
Business and Energy Secretary Alok Sharma said:
In addition to the price cap, millions of customers have been able to benefit from lower bills as the numbers of those switching to cheaper tariffs has increased and the rollout of smart meters has progressed in recent years.
A total of 2.8 million electricity and 2.1 million gas customers switched supplier in the first 6 months of 2020, building on record numbers of households switching to cheaper tariffs in 2019, the first full year of the Energy Price Cap.
However, more than half of customers are still on standard variable or default tariffs, where, in the absence of the cap, they would likely still be paying excessive charges for energy use.
In August, the independent energy regulator, Ofgem, recommended an extension to the cap following a review into the market. Today’s announcement follows that recommendation.
The Energy Price Cap extension is the latest government measure to help vulnerable customers with their energy bills and follows particular support during the coronavirus pandemic.
Energy suppliers have given prepayment and pay-as-you-go customers support when they faced financial distress.
Those with prepayment meters have also benefited from a price cap that is in place until the end of the year.
Today’s announcement means a further 4 million households with prepayment meters on default tariffs will continue to be protected from excessive prices by the wider Energy Price Cap once the Competition and Market Authority’s Prepayment Meter Cap expires at the end of 2020.
Jonathan Brearley, Chief Executive of Ofgem, said: