A price cap on energy bills will be introduced to help loyal customers and end ‘rip-off’ energy prices, Prime Minister Theresa May announced this afternoon.
Full details will be published in draft legislation next week.
The Prime Minister accused energy firms of punishing loyal customers. Loyal customers are usually defined as those on standard variable energy tariffs, which are often suppliers’ most expensive rates.
A price cap on energy bills was first promised in the Conservative election manifesto in June.
Theresa May said today: ‘The energy market punishes loyalty with higher prices, and the most loyal customers are often those with lower incomes, the elderly, people with lower qualifications and people who rent their homes.
‘That’s why next week this government will publish a draft bill to put a price cap on energy bills.’
Which? managing director of home products and services, Alex Neill, said: ‘It is clear that millions of hard-pressed energy customers are still suffering due to a lack of competition in the energy market and so will welcome action to bring down their bills.
You can start saving money now, before the price cap comes into force. Compare energy prices using Which? Switch to find the best energy deal for you.
Is this the end of the standard variable energy tariff?
Energy companies have been under fire in recent months for the cost of their standard variable tariffs and the number of customers on them. Our campaign in early 2017 called for energy firms to publish plans for engaging customers on standard tariffs who don’t switch.
The number of customers on standard – or out-of-contract – tariffs varies by company. The difference between the standard tariff and cheapest deal can also be between £13 and £269 for the Big Six energy suppliers.
SSE has the highest proportion of customers on its standard tariff (72%) of the Big Six firms, while just 39% of Scottish Power’s customers are on its standard deal.
British Gas plans to trial alternatives to its standard variable tariff. Currently nearly five million of its customers are on this tariff. Previously it said it believes that standard tariffs should be phased out.
Eon customers with a smart meter will be put onto a one-year fixed tariff with no exit fee from early next year instead. At the end of the tariff, they will automatically ‘roll over’ onto the latest fixed deal. Eon said it’s also ‘working on options for classic meter customers’.
How to save up to £353 on your energy bill now
There are no exit fees on standard tariffs. So if you’re on one, you can switch your tariff or supplier penalty-free.
Standard tariffs with the Big Six cost £1,131 per year on average, for a medium user. Npower’s is the priciest – £1,166 per year. Switch from this tariff to the current cheapest on the market available in England, Scotland and Wales, (Iresa Flex 4 12 month direct debit, £820) and you could save up to £345 in a year.
Even if you switch from the cheapest Big Six standard tariff (British Gas, £1,101 per year), you’d still save £281.
The first step is to compare energy tariffs to find the best for you. To get the most accurate quote from an energy comparison site, look at your bill or annual statement to find out your annual energy usage (in kWh).
Our quick, straightforward step-by-step guide to switching energy supplier will help you. Which? research found 87% of those who switched said it was easy.
Our energy and price research
We surveyed 8,657 members of the GB public who are responsible for paying their energy bills in September and October 2016.
Our pricing data is from Energylinx, based on a medium user (Ofgem average use of 3,100kWh electricity and 12,000kWh gas per year), paying by monthly direct debit, with paperless billing. Data is correct on 4 October 2017.