One million Brits to be protected by safeguard energy tariff

One million British households are set to save an average of £120 a year on their energy bills, Ofgem announced on Wednesday, as it confirmed an extension to its prepayment safeguard tariff for “more vulnerable people” this coming winter.

The regulator said it would work on extending price protection to at least another two million vulnerable households ahead of winter next year, once the timing of the government’s price cap is confirmed.

Following an announcement from Theresa May last week, Ofgem said it will work with the Government so that all consumers on standard variable and other default tariffs received price protection as soon as possible if legislation is in place.

The Government planned to provide price protection to all households on default deals, the Prime Minister said, in a bid reassure them the price they paid reflected the underlying costs of supplying their energy.

Consumers would still be able to save even more money by switching to a better deal, Ofgem noted.

The regulator said it would consult on the design of the safeguard tariff for default deals while the Government’s draft bill progressed through Parliament.

In the meantime, it called on suppliers to step up efforts to get more of their customers currently on default tariffs onto better value deals.

It said some suppliers had recently come forward with proposals to do so, but stressed more action was required.

To help with that, Ofgem said it was introducing new rules immediately to allow suppliers to roll customers coming to the end of their contracts onto another fixed deal instead of a poor value standard variable tariff.

It added that it would be “carefully monitoring” to ensure any new default deals did not become another way to penalise customers who rarely switch.

Under a separate initiative to “boost confidence” in the switching process, Ofgem said it was proposing that consumers would receive automatic compensation if their switch went wrong.

The regulator said it was continuing work to implement the remedies put forward by the Competition and Markets Authority last year to make it easier for people to engage in the market.

“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,” said chief executive Dermot Nolan.

“The Government’s proposed bill to provide price protection to those who remain on poor value default deals, such as the standard variable tariff, will give these households peace of mind about the price they pay for their energy.”

Nolan said that in the meantime, Ofgem expected suppliers to “do more” to get customers on poor value default tariffs onto better deals.

“We also expect suppliers to co-operate when Ofgem initially introduces a safeguard tariff for around 1 million vulnerable households this winter.

“The introduction of further price protections will give time for Ofgem’s reforms to work and for smart meters to be rolled out across the country as we move towards a smarter, fairer, more competitive market.”