OFGEM details new plans to cap household energy bills for vulnerable customers

OFGEM has announced plans to protect vulnerable household energy consumers as part of a wider programme to make sure all consumers get a better deal.

The move is a partial-response by the UK regulator to the Competition Authority report into the energy market which found that consumers are paying more than £1.2 billion a year in energy bills then they need to because – for whatever reason –  they are stuck on standard tariffs and do not benefit from lower rates available from independent energy provides outwith the Big Six. 

Options being considered include:

  • Introducing a safeguard tariff for vulnerable consumers which would protect them from overpaying for their energy. 
  • New reforms to take the hassle out of switching and make it easier to get a better deal 
  • Proposals to cap warrant charges to install pre-payment meters and ban these charges altogether for the most vulnerable 

For consumers more able to engage in the energy market, OGEM is taking action to take the ‘hassle’ out of switching. While the number of switches is at a nine year high, too many people think it’s  still too much hassle and have never or rarely switched.

The UK regulator has already announced plans to cap at £150 the price suppliers can charge customers for installing a pre-payment meter under warrant and to ban these charges altogether for the most vulnerable. Pre-payment meters are typically installed under warrant when a customer cannot or will not pay their energy bill. 

OFGEM is also changing the rules for price-comparison websites to make it easier for people to switch to cheaper deals. Currently, users can’t switch directly to some of the cheapest deals listed and have to visit the supplier’s own website and re-enter their details.

This rule-change will give customers better access to cheaper deals, allowing them to switch directly from a price comparison site. Consumers will still be able to see other deals that they cannot switch to directly by clicking a button on the comparison website, or by visiting the Citizens Advice website. 

The regulator also plans to trial a new ‘Check Your Energy Deal’ online switching service to help customers who have been on poor value standard variable tariffs for three years or more to find cheaper deals. They will be able to see quickly how much they can save simply by entering their address including postcode and name of current supplier and the new service will make switching easy with a few clicks.  

Dermot Nolan
Dermot Nolan

Dermot Nolan, OFGEM chief executive, explained: “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. 

““Suppliers must also do more to get all their consumers, particularly those on poor value standard variable tariffs, a better deal. We are pressing ahead with a raft of reforms to make it even easier for people to switch no matter how they choose to shop around.”  

Meanwhile, the GMB trade union has called for OFGEM to be scrapped and for the Government step in to regulate the energy sector.

GMB, the union for energy workers, has commented on British energy secretary Greg Clark’s assertion that OFGEM can fix the failings in the energy market via the imposition of price regulation on suppliers after former energy regulator Stephen Littlechild said that OFGEM did not have the power to fix prices.

Justin Bowden, GMB National Secretary for Energy, said: “OFGEM has been a toothless watch-dog that passed its sell-by date a long time ago.

“It should be abolished and all its regulatory functions taken over by the government itself, making its regulatory role subject to scrutiny and accountable to parliament with the powers to cap prices if deemed necessary.

“This would form the basis of an energy policy that took the real decisions needed to keep the lights on and ensure the decarbonisation of the sector, whilst guaranteeing the resources needed to generate jobs and to pay for the vital infrastructure needed to maintain our power networks.”

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