Ofgem extends price protection to one million more vulnerable households this winter

Theresa May has said that she wants to cap tariffs for all 12 million households on poor value standard tariffs

Theresa May has said that she wants to cap tariffs for all 12 million households on poor value standard tariffs Andrew Milligan  PA

"This draft bill. requires Ofgem to modify the standard license conditions for gas and electricity suppliers, so as to include conditions that impose a price cap for standard variable tariffs and default tariffs offered to domestic customers", explanatory notes accompanying the legislation said.

Under the bill, the regulator Ofgem would bring in a price cap on the poor value tariffs that exploit customer loyalty, which would protect around two-thirds of households and 18 million customer accounts, according to the Government.

Ofgem said on Wednesday that whatever was contained in the upcoming legislation, the government's price cap would not come into effect for the upcoming winter.

"I have been clear that our broken energy market has to change", the Prime Minister said.

The draft bill is expected to be published on Thursday.

Will Hodson, co-founder of collective switching organisation The Big Deal, said: "This price cap is hugely welcome".

Theresa May had vowed to revive a plan to cap charges for an extra 12 million consumers.

Around two-thirds of all energy customers in the United Kingdom are now on these variable tariffs.

"The Government can not have it both ways. Instead it should focus their efforts on widening access to the Warm Home Discount for vulnerable households".

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The bill, which will need to be scrutinised by parliament before passing into law, proposes that caps would be applied to the standard variable tariffs offered by providers.

The government revealed on Thursday that the cap will be an absolute rather than relative one, where the gap between a supplier's cheapest and most expensive tariff is restricted.

Dermot Nolan, chief executive of Ofgem, said: 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.

Prime Minister Theresa May first proposed a price cap on the energy sector earlier this year, the biggest market intervention since its privatization nearly 30 years ago.

People will be able to save even more money by switching to a better deal. "An absolute cap would throttle competition, be out of date as soon as the wholesale price of gas goes up or down, and energy firms would spend more time lunching their regulators than delighting their customers".

The regulator said it will work on extending price protection to at least 2m more vulnerable households for winter next year, once the timing of the government's price cap is put in place.

But SSE was 1% higher, having already seen its shares tumble last week after Mrs May's speech. Customers are still likely to be better off by searching and switching themselves.

What is a standard variable tariff?

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