Authorization

Energy price cap could run until 2023 in Government clampdown on suppliers

The Government's controversial plan to cap energy prices will apply to around 18 million accounts that use standard variable tariffs at least until 2020 and possibly beyond, according to officials.
The Energy Bill is due to be presented before Parliament later today, and will begin the process of putting in place an absolute market-wide cap on energy supplier tariffs in the most severe intervention in the energy market since its privatisation.
Energy price cap could run until 2023 in Government clampdown on suppliers

Business Secretary Greg Clark

Credit:
Julian Simmonds
Under the plans homes in England, Wales and Scotland on Standard Variable Tariffs (SVTs) and other default tariffs will have their prices capped at least until the end of 2020, and for potentially as long as until 2023.
"It will be an absolute cap, and in setting it Ofgem must have regard to the need to: protect customers, create incentives for suppliers to improve efficiency, enable effective competition for domestic supply contracts, maintain incentives for customers to switch and ensure efficient suppliers are able to finance their activities," a Government statement said.
Dual-fuel tariff
The move is expected to strangle growth among the largest energy companies, potentially knocking earnings of British Gas owner Centrica where retail energy makes up over a third of its earnings before interest, tax, depreciation and amortisation, and raising serious questions among its investors over future dividends.
Reader Service: Save on Gas and Electricity with the Telegraph Energy Switching Service
The Bill will require Ofgem to implement the cap "as soon as practicable after legislation is passed", but is unlikely to help hard-hit consumers before this winter, or potentially even the winter after.
What are the Big Six energy companies?
Ofgem has already capped energy prices for customers on pre-pay meters, which typically charge over the odds for energy, and will extend this cap to socially vulnerable consumers eligible for winter heating schemes. This move will also not come in fast enough to help consumers this winter, Ofgem boss Dermot Nolan admitted yesterday.
Last week the threat of a full price cap drove Centrica's share price to 14-year lows.
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