Advertisement

Almost 11 million households will benefit from energy price cap extension

The energy price cap will be extended in January - Owen Humphreys/PA Wire/Owen Humphreys/PA Wire
The energy price cap will be extended in January - Owen Humphreys/PA Wire/Owen Humphreys/PA Wire

Close to 11 million households in the UK will continue to “get the protection they deserve” on their energy bills, as the Government extends its price cap.

Since its introduction in January 2019 the cap has saved customers around £1 billion a year, with a typical annual saving of between £75 and £100.

The price limit will be extended until the end of 2021 and an additional four million households with prepayment meters will also come under the protection from January.

Business and Energy Secretary Alok Sharma said: “The energy price cap has been vital in ensuring customers do not pay too much on their bills, which is why we are keeping it in place for at least another year.

“Switching energy supplier to find the best value deals is still the best way to save on bills, but this government is determined to make sure all customers are treated fairly and get the protection they deserve.”

Earlier this year the energy price cap, set by Ofgem, fell from £1,126 to £1,042-a-year, the lowest since it was first introduced in January 2019.

The idea for a cap was first put forward by former Labour party leader Ed Miliband in 2013, after a series of energy price hikes and was later adopted by then-prime minister Theresa May.

The concept has proved unpopular with big energy giants. Npower quickly axed 4,500 jobs in 2019 after complaining the cap left its consumer business in a “critical and unsustainable" state.

However, there is evidence customers do get a better deal. Research by Which? found that there were five times more gas and electricity deals costing less than £1,000 per year for an average household to choose from on January 1 2020, compared with January 1 2019.

Meanwhile, a record 2.8 million electricity and 2.1 million gas customers switched suppliers in the first six months of 2020.

However, more than half of customers are still on standard variable (SVT) or default tariffs, where, in the absence of the cap, consumers "would likely still be paying excessive charges for energy use".

Jonathan Brearley, chief executive of Ofgem, said: “The Secretary of State’s announcement means that 15 million households will continue to be protected under the price cap, and will pay a fair price for their energy in 2021.

“Although those protected by the cap are paying a fair price, they can also reduce their energy bills further by shopping around for a better deal.

“Ofgem will continue to protect consumers in the difficult months ahead as we work with industry and government to build a greener, fairer energy system.”