Energy price cap comes into force

Ofgem estimates the cap will save around 11 million people £76 per year on average.

The cap means that typical usage by a dual fuel customer paying by direct debit will cost no more than £1,137 a year.

The aim of the cap is that households in England, Scotland and Wales on default tariffs, such as standard variable tariffs, should be better off after it is introduced. Those on a prepayment meter already have a price cap in place, while those who chose their tariff are ineligible.

Northern Ireland has a separate regulator and already has a price cap in place.

The cap is based on the cost per unit of energy rather than the total bill, so those who use more energy will continue to pay more than those who use less.

It is designed to mean default tariffs fairly reflect the costs to suppliers of providing electricity and gas. The level of the cap will change on April 1, 2019. Ofgem will then revise it every six months to reflect any changes in underlying costs to suppliers and could go up or down.

Gillian Guy, chief executive of Citizens Advice, said: “The introduction of this cap will put an end to suppliers exploiting loyal customers. However, while people on default tariffs should now be paying a fairer price for their energy, they will still be better off if they shop around.

“People can also make longer-term savings by improving the energy efficiency of their homes. Simple steps, such as better insulation or heating controls, are a good place to start.”