A million more households will see their electricity and gas bills capped this winter after energy regulator Ofgem extended an existing price cap for 4 million vulnerable customers.
The move is an interim step towards Theresa May’s promise to put a ceiling on bills for the much wider group of people on standard variable tariffs, the poor value tariffs that around two-thirds of consumers are on.
Ofgem said the extra 1m households would save £120 on average on their annual dual fuel bill once the so-called safeguard tariff takes effect by February.
“This will provide some short-term relief for vulnerable customers, ahead of government plans for an energy price cap being realised,” it said in a statement.
The households that will be protected by the cap are those that are in receipt of the warm home discount, an existing payment for people on certain benefits. The cap will be extended to a further 2 million people in winter 2018/19, Ofgem said.
Dermot Nolan, the Ofgem chief executive, said: “Ofgem shares the government’s concern that the energy market is not working for all consumers and is determined to reduce the detriment suffered by those overpaying for their energy, particularly those who are vulnerable.”
The 1m figure is about half the number that the industry and Ofgem were believed to have agreed before the prime minister’s surprise announcement last week of a market-wide cap, suggesting some pushback by energy companies after May’s speech.
Ofgem’s plans come on the eve of the government’s publication on Thursday of a draft energy bill for the cap on standard variable tariffs, which is unlikely to take effect until next winter at the earliest.
Nolan added that while the legislation worked its way through parliament, he expected energy firms to do their best to move customers off standard variable tariffs.
To that end, Ofgem is also changing rules on Wednesday that had previously meant suppliers had to move customers onto standard variable tariffs at the end of a fixed tariff. Now they will be able to automatically roll them onto another fixed deal, provided it is cheaper.
Scottish Power and E.ON have said recently that they are taking steps to end the tariffs, switching billpayers to cheaper, fixed-term deals instead.