The cap will tackle the amount consumers have been overpaying the Big Six energy suppliers, which the Competition and Markets Authority (CMA) found to be an average of £1.4 billion a year.
Some consumers could save up to £350 a year on gas and electricity bills by switching suppliers.
The cap will be in place from the end of 2018 until 2020 when Ofgem will recommend if the cap should remain on an annual basis up to 2023. Ofgem will review the level of the cap at least every six months while it is in place.
Sources at Westminster last night suggested that – after months of ‘nothing but Brexit, Brexit and Brexit’ legislation in parliament – the UK government was triggered into ‘other business’ in pushing through this energy price-cap bill for Autumn 2018 in case the Tories decide on a snap UK general election.
One said: “Rushing through this bill does not mean there will necessary be a snap election in the Autumn – but it does mean there’s some ‘good news’ in the pipeline for Prime Minister May if need be.”
Alongside this, the UK Government has announced its flagship energy efficiency scheme will help support more low income and vulnerable consumers.
The Domestic Gas and Electricity (Tariff Cap) Bill will put in place a requirement on the energy regulator, OFGEM, to cap standard variable and default energy tariffs.
Prime Minister Theresa May told MPs yesterday: “For far too long older people, hard-working families and those on low incomes have been subject to rip-off energy tariffs.
“Our energy price cap will protect households from unfair price rises in time for this winter when people can feel the pinch more acutely. We know that the cost of living is still a challenge for some families and today marks an important step in helping people to keep more money in their pockets.”
UK Business and Energy Secretary Greg Clark added: “This Bill, which delivers on our manifesto promise, is a necessary intervention to protect millions of energy customers who have been stuck on poor value deals and hit by unjustified price rises for far too long.
“Switching will always save people money, but that doesn’t mean that customers should be punished for their loyalty.”
The UK Government also announced that its flagship £6 billion home energy efficiency scheme (in England only) will be entirely focused on upgrading over one million low income and vulnerable households for the next three and a half years.
At Citizens Advice Scotland, energy spokesman Craig Salter commented: “The introduction of the price cap for default tariffs is a welcome intervention, and it will help protect some consumers against high price increases this winter. But this is only a first step.
“Last year, standard variable tariffs rose at three times the rate of inflation, and for many, energy bills remain unaffordable.
“With fuel poverty rates still at 26.5% in Scotland, and energy prices the key driver of this – particularly for the significant numbers of people reliant on electric heating – other measures are required to help consumers reduce their energy bills.
“We encourage consumers struggling with their energy bills to visit their local Citizens Advice Bureau, and we also urge energy companies to take action to move their customers to more affordable tariffs.”
20 Jul 2018