Ofgem Puts Price Cap On Pre-Pay Energy Meters

Ofgem has revealed plans to try to protect vulnerable people from being overcharged for their gas and electricity by putting a price cap on pre-payment meters. 

This comes in response to a report from the Competition and Market Authority (CMA) in June, which said the UK's big six energy suppliers are still overcharging customers.

The proposed reforms to energy pricing include freeing up competition and innovation in the market, driving down bills and introducing a price cap on pre-payment meters.

This cap will aim to help the "most vulnerable and least likely to switch" and will save them around £75 a year from next April, according to the regulator.

Other proposals include working with suppliers to help "disengaged" customers shop around more, and introducing smart meters to make switching suppliers faster and easier.

Ofgem has also revealed plans to pilot a database service in 2017, which will allow rival suppliers to offer those customers on standard variable rates for three years or more better value deals.

"The CMA's final report is a watershed moment for industry and consumers and points the way to a fairer and more competitive future," said chief executive Dermot Nolan.

"I call on energy companies and consumer groups to seize this opportunity."

The CMA's two year long inquiry identified that the big six energy suppliers have been overcharging customers by up to £1.4bn a year.  

It confirmed that two thirds of households are paying over the odds for their energy compared to those who had switched suppliers, actively seeking a cheaper deal.

Alex Neill, director of policy and campaigns at Which? says after two years of investigation into the energy market it is now time for action, but warned of the difficulties Ofgem may face in implementing the necessary changes

"The regulator faces a huge challenge in implementing all of these recommendations in a way that stimulates competition to deliver better outcomes for many more consumers," he said.

"For this to happen the industry will need to commit to working with the regulator to ensure people get a fairer deal on their energy."

Energy supplier E.ON has released a statement saying, "As with the publication of the CMA report, we will now review Ofgem's proposals in detail to fully understand the implications for our customers."

EDF Energy has reiterated its support for swift implementation of the CMA's remedies.