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An electricity and gas price cap for customers who use prepayment meters could save more than 4m households around £80 a year, according to Britain’s energy regulator.
Ofgem has today announced the levels of a price cap that will come into force in April for households that use prepayment meters – often seen as the most vulnerable and the least able to benefit from competition in the energy market.
The measure was one of the recommendations made by the UK’s competition regulator last year following a two-year probe into the retail energy market, although there was disappointment in some quarters that the price cap was restricted to prepayment customers only.
The cap is being rolled out at sensitive time for energy providers, with Npower having sparked fresh furore over households bills last week when it raised average energy bills by nearly 10 per cent for half of its customers.
According to Ofgem, 4.5m households in the UK had pre-payment electricity accounts at the end of 2015 – 17 per cent of all domestic electricity accounts – and there were 3.5m such accounts for gas.
The exact level of the cap – which will expire in 2020- depends on where a customer lives and the type of meter installed but Ofgem said it will require many energy providers to make significant reductions – of as much as 15 per cent – to their current tariffs.
Dermot Nolan, chief executive of Ofgem, said: “We want all consumers to enjoy the benefits of a more competitive energy market, regardless of their circumstances.”