Ofgem to adopt CMA’s price cap and switching proposals

Plans to protect prepayment customers and encourage more switching have been revealed by Ofgem.

The regulator has outlined its approach to the recommendations of the Competition and Markets Authority (CMA) following a two-year investigation which found Big Six companies have been overcharging customers.

It also revealed two-thirds of householders are disengaged and paying more for their gas and electricity than customers who have switched suppliers.

Prepayment energy customers will be protected by an interim price cap from April next year, which is expected to help four million people save around £75 a year.

The cap will expire in 2020 when the rollout of smart meters is expected to be completed.

It is part of Ofgem’s plans to try to protect vulnerable customers from being overcharged for their gas and electricity.

Suppliers will also be required to hand over details of any customer who has been on an expensive default tariff for three years or more in a bid to encourage them to switch.

The regulator will pilot a database service next year, which will allow rival suppliers to offer better value deals to those customers.

Ofgem Chief Executive Dermot Nolan said: “The CMA’s final report is a watershed moment for industry and consumers and points the way to a fairer and more competitive future. We are acting on these reforms and we expect energy companies, consumer groups and government to seize this opportunity to deliver a more competitive and fairer energy market for all consumers.

“We will closely monitor how the energy market develops as these reforms are implemented and will do so with a particular focus on consumer outcomes. We are committed to assessing competition and consumer outcomes in the GB energy market and we will not hesitate to take action if we feel that outcomes for consumers are not as good as they could be.”

The regulator has launched a consultation on the CMA’s proposals to remove parts of its Retail Market Reforms “so consumers can enjoy a wider choice of innovative good value deals”.

It is also consulting on its approach to the recommendations to remove the requirement for price comparison websites to display all the tariffs on the market.

Ofgem expects the changes to come into effect by early 2017.