Energy watchdog Ofgem to cap meter charges under measures to make market fairer

ITV News' Business Editor, Joel Hills, reports.

Watchdog Ofgem has announced that it will impose a cap on pre-paid meters to protect customers from being overcharged.

The change is part of a package of measures which the electricity and gas regulator says will help lower bills for many households.

Here's what we know.

  • What are the changes?

The key change is a cap on pre-paid energy meters which will help some of the poorest customers.

Ofgem said four million households would each save around £75 per year as a result of the cap, which will come into effect in April and last until 2020.

Energy companies will be forced to share data to help rival companies to offer consumers better deals and Ofgem will pilot a database allowing suppliers to offer customers better value deals.

The regulator will also step up campaigns urging consumers to shop around including a trial of "more effective" prompts on bills urging households to check they are getting the best deal.

  • Why is Ofgem making these changes?

Today's announcement follows a two-year investigation into the energy markets by the Competition and Markets Authority (CMA).

It found that two-thirds of customers don't shop around - and therefore pay higher rates than those who do regularly change suppliers.

Ofgem said the changes would create a "more competitive and fairer energy market for all consumers".

"The CMA's final report is a watershed moment for industry and consumers and points the way to a fairer and more competitive future," Dermot Nolan, Ofgem's chief executive, said.

"I call on energy companies and consumer groups to seize this opportunity."

  • How have the big electricity and gas companies responded?

The big six - who supply energy to almost 90% of homes in the UK - have not yet made any formal response but will be carefully scrutinising the changes.

A spokesman for E.ON said: "We will now review Ofgem's proposals in detail to fully understand the implications for our customers."

  • What do consumer groups say?

Consumer groups welcomed action to increase competition - but warned it could be tough to ensure all consumers see the benefit.

Alex Neill, director of policy and campaigns for consumer group Which? hailed Ofgem for swiftly taking action.

"The regulator faces a huge challenge in implementing all of these recommendations in a way that stimulates competition to deliver better outcomes for many more consumers.

"For this to happen, the industry will need to commit to working with the regulator to ensure people get a fairer deal on their energy."

  • Analysis

Energy companies' share prices barely moved after this announcement - suggesting that the markets think there will be very little real change, reports ITV News Business Editor Joel Hills.

However, there have been some signs of disquiet among the 'big six' in recent months.

The question now is whether customers who are overpaying as a result of failing to shop around will respond to prompts to change suppliers.