An energy price cap for vulnerable customers could be introduced as part of a raft of Ofgem proposals – but energy switching sites will no longer have to show you by default ALL the tariffs you can switch to, following a U-turn by the regulator.
Ofgem is considering a 'safeguard tariff' for vulnerable customers to stop them overpaying, extending a similar cap introduced in April this year for those on prepayment meters.
The details of the safeguard tariff have not yet been decided, but one option is to extend the price cap to all customers who receive the Warm Home Discount, which is available to people on certain benefits or low incomes.
It falls short of the Conservatives' pre-election pledge for a wider energy price cap. Though you don't need to wait for a price cap to save – if you're one of the 66% of households on a standard tariff, you're almost certainly overpaying. Do a comparison to find your cheapest deal using our free Cheap Energy Club.
The proposed cap is one of a series of changes announced today to try to encourage people to switch their energy.
As part of the changes, from today price comparison sites will only have to show by default the energy deals they can directly link to – which may not always be the cheapest.
MoneySavingExpert.com founder Martin Lewis has given his initial thoughts on the changes...
What is the 'safeguard tariff'?
The safeguard tariff aims to ensure vulnerable customers don't overpay for their energy. It would set a cap on the maximum per-unit amount they can pay.
A similar cap was introduced in April this year for the 4.5 million prepayment customers in Britain – with the exact level of cap depending on whether you have gas or electricity, your meter type and what region you're in. For households with typical usage it was supposed to mean an average saving of about 10-15%, or around £80/year.
Ofgem will hold a summit later this month to discuss how this cap can now be extended to help vulnerable users on credit meters. It's not clear if this would work in the same way. It could be extended to those who receive the Warm Home Discount, and if this is the case, it'd mean a total of six million customers would have a safeguard price promise in place.
Ofgem's proposal comes after the Conservatives' energy price cap pledge was left out of last month's Queen's Speech. Energy Secretary Greg Clark instead wrote to Ofgem asking it to use its powers for "safeguarding customers on the poorest value tariffs", adding that there was a need to "proceed without delay".
In response Dermot Nolan, Ofgem chief executive, wrote today: "Protecting vulnerable consumers is a priority for Ofgem. We are committed to ensuring that the more disadvantaged in society are not left behind as we move towards a smarter, more competitive energy market."
Ofgem is also consulting on how to introduce a £150 cap on the price suppliers can charge when installing prepayment meters at properties for debt recovery purposes – at the moment this can cost £1,000 – and banning any charges for the most vulnerable.
Comparison sites no longer have to show all deals by default
From today consumers who use price comparison sites may only see energy deals they can directly switch to by default, after a rule change by Ofgem. That means you may have to click a button to see other tariffs which you can't directly switch to via the site – even if those tariffs are cheaper.
Ofgem claims this change will help encourage switching, by ensuring consumers are shown tariffs they can switch to directly without having to re-enter their details.
However, it's a reversal of new rules brought in in 2015 which forced price comparison sites to show all deals, including ones a customer couldn't directly switch to. The U-turn follows an investigation by the Competition and Markets Authority, which found the so-called 'whole of market rule' actually made it more difficult for customers to switch.
It will monitor today's changes, and plans to remove the whole of market requirement - which means all deals including the tariffs the price comparison sites have no direct link for -altogether by the end of the year.
Ofgem says about five million people used price comparison sites to search for energy deals last year, but fewer than half went on to switch. It estimates that nine out of 10 people who searched a comparison site and switched did so using a direct link.
MoneySavingExpert's Cheap Energy Club will continue to show users ALL available tariffs.
What other changes are being made?
Ofgem has also announced it will hold two further trials:
- A 'Check Your Energy Deal' trial. Customers who have been on their supplier's standard tariff for three years will be able to use a new Ofgem-run switching service. The trial will take place in September in Northampton, with up to 10,000 customers from one supplier.
- Cheaper offer trial. Customers will receive a letter from their supplier or from Ofgem telling them about cheaper offers from rival companies.
It will also look at how annual estimates are calculated for customers to make them more helpful when comparing tariffs to switch to. See our Ofgem to change rules on 'personal projections' news story for full details.