Following the Prime Minister's proposal to cap energy prices, energy minister Greg Clark has said consumers could see the cap in effect as soon as this winter.
Yesterday, Prime Minister Theresa May delivered a speech to her fellow Conservatives at the party's annual conference in Manchester during which she spelled out proposals to put a price cap on a standard variable tariff (SVT) for gas and electric.
She said: "The energy market punishes loyalty with higher prices, and the most loyal customers are often those with lower incomes, the elderly, people with lower qualifications and people who rent their homes."
The full details will be published in a draft Parliamentary bill next week.
With the cap in place consumers could make a saving of £100 a year. The promise of a cap was included in the Conservative's election manifesto, but was absent from the Queen's Speech in June.
Mr Clark was interviewed on the BBC’s Today programme, and to questions of whether the cap will be in place by winter he responded: "Precisely. That's exactly why I'm keen that Ofgem makes use of their powers."
He went on to say: "If they [Ofgem] need legal back-up there is a strong consensus in parliament for this, so we will publish legislation and we'll invite the whole House to endorse this so that they have the legal certainty."
Mr Clark’s statement appears to call on the energy regulator, Ofgem, to step up and put pressure on energy companies to adhere to the cap.
Around 70% of UK households are currently on SVT, which has been described as a ‘typically expensive’ way to pay bills.
Citizen Advice has said in the last year energy prices have risen more than three times the rate of inflation.
While bill payers around the UK may be jumping for joy at the news of a price cap Iain Conn, the chief executive of Centrica, the parent company of British Gas, believes they are not the answer to cheaper energy prices.
He said: “We agree that some further structural change is required. However, we have also been clear that price caps are the wrong solution.
“There is clear evidence that where they have been tried, they have been bad for customers. They limit choice, reduce competition, and prices tend to cluster around the cap."
Mr Conn insists SVT is the problem.
He said: “We believe a more effective and long-term solution would be for the regulator [Ofgem] to end the standard variable tariff across the industry and to make some other structural changes."
The Competition and Markets Authority has accused energy providers of overcharging customers by £1.4bn. Mr Conn claims this figure is the industry's entire profit so it is not possible for companies to have overcharged by such an amount.
Gillian Guy, chief executive of Citizens Advice, said: “The Prime Minister’s announcement of a cap on energy bills could provide a solution to the runaway energy costs that the millions of people on default tariffs have faced for years.
“We’d encourage the government to look at what it can do to help households in the short-term, recognising that legislation can take time, including ensuring that protection for low-incomes pensioners and families comes into force this winter.”
Standard variable tariffs are basic rates that can go up or down and are rarely the cheapest way to take energy from a provider. If a customer does not choose a specific energy plan, for example after their fixed tariff ends, they are moved to an SVT until they choose a new one.
Customers can also make an active choice to have an SVT.