UPDATE: Draft Energy Price Cap Bill To Empower Ofgem Published

LONDON (Alliance News) - The UK government published the draft legislation designed to lower ...

Alliance News 12 October, 2017 | 2:25PM
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LONDON (Alliance News) - The UK government published the draft legislation designed to lower the cost of energy bills on Thursday by introducing a price cap on energy prices, impacting standard variable tariffs and other default tariffs in England, Wales and Scotland.

The UK Department for Business, Energy & Industrial Strategy require Ofgem, the UK energy industry regulator, to consult and impose the cap "as soon as practicable after the legislation is passed."

It added that it would be an "absolute" cap and in setting it Ofgem must balance the need to protect customers, incentivise energy suppliers to improve efficiency, enable effective domestic supply contracts competition, encourage customers to switch tariffs and providers and ensure efficient suppliers can finance their activities.

The department said the cap would be a temporary measure until the end of 2020. It said the "need for it would be kept under review" and it will have the potential to be extended until the end of 2023 "at the latest".

With prepayment meters already subject to a cap, they will not be impacted by the proposed changes, as well as 'green' energy tariffs.

The draft legislation comes after Prime Minister Theresa May last week at the Conservative Party Conference in Manchester committed to introducing a price cap to protect consumers and maintain incentives for switching, and to encourage suppliers to innovate, compete and finance their business.

Earlier this year, Ofgem laid out plans to introduce a safeguard tariff for the most "vulnerable" customers in the UK, following pledges made by the Conservatives during the UK general election to crack down on rising energy costs.

After pledging to introduce a price cap on the standard variable tariffs used by 17 million UK households, the Conservatives then watered down the proposals when they released their manifesto simply commissioning a review of the about how to bring costs down, abandoning its previous commitment to introduce a cap of GBP100 per customer per year.

Meanwhile, Ofgem on Wednesday extended its prepayment safeguard tariff to 1 million more "vulnerable households" for winter, having in August reduced the prepayment meter safeguard tariff to cut bills for around 3.0 million UK households.

Those safeguards are separate from the government's plans, and Ofgem is intending to extend this price protection to at least a further 2 million vulnerable householders for winter next year, once the timing of the UK government's price cap is confirmed.

By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance

Copyright 2017 Alliance News Limited. All Rights Reserved.

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