personal finance

Energy bills: 10m customers to find out if they will save £100

Households will discover this week whether they will save £100 on their annual energy bills as Theresa May promised them.

Energy regulator Ofgem is due to set out the level of the government’s energy bill price cap on Thursday, which will protect more than 10m households on default tariffs.

The figure will be crucial to determining big firms’ profit margins and whether the government can claim it has delivered on its pledge.

SSE offers the cheapest default tariff of the big six at £1,196 but has not yet announced a second price rise this year, unlike four of the other large suppliers.

The most expensive is Scottish Power on £1,257 from October, although that could be eclipsed by npower if it announces a second price rise.

Industry experts believe Ofgem will set the cap on default tariffs in the region of £1,150 to £1,200.

If it was at the lower end of that range, that would allow ministers to say they had saved some consumers about £100.

Gillian Guy, the chief executive of consumer group Citizens Advice, said: “Loyal energy customers have been overcharged for too long. The price cap should stop the worst overcharging in the market, but still allow well-run firms to make a profit.”

However, she added that while the cap would save loyal customers money, the best way to cut energy bills was still to switch supplier.

A key question will be whether the cap will be below an existing one for 5m households, most of whom are on prepayment meters, which are typically used when people fall behind on payments. Prepayment meter customers cost energy firms more to serve than those on direct debits.

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Ofgem recently said that cap would go up £47 a year to £1,136, because of rising wholesale energy prices.

Ed Reed, the head of research at analysts Cornwall Insight, said: “It will be interesting to see how they can create a cap that’s cheaper than the prepayment meter one.

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“How can you justify one that is the same as or higher than the existing one, when we know [prepayment] costs are higher?”

Ofgem will have little wiggle room because the new, wider cap is expected to factor in the costs of the roll-out of smart meters. The existing, narrower cap does not consider those.

The price cap number this week will be a predictive one, with the energy regulator publishing the final level in October. The cap takes effect at the end of December.


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