Ofgem to be handed ‘nuclear deterrent’ to keep energy prices down

A general view of a gas hob burning as consumer groups are predicting that the UK’s other major energy suppliers will raise prices after SSE announced an 8.2% increase in domestic bills. Credit: PA Archive/PA Images

Energy watchdog Ofgem is set to be handed new statutory powers – dubbed a “nuclear deterrent” – to end inflated prices.

The new legislation to free people from “rip off” energy tariffs should be operating next winter, a move which would protect 11 million customers.

The law will allow energy regulator Ofgem to limit how much companies can charge customers for their standard variable tariffs.

Tory former minister John Penrose, who welcomed the Domestic Gas and Electricity (Tariff Cap) Bill’s departure from the Commons for Royal Assent, said he hoped the new powers would “never need be used”.

He said: “While we all hope that those powers are not needed, that the reforms which are designed to sharpen competition mean that they are never needed to be used, it will mean in future that they can be used and with any luck like a good nuclear deterrent, no-one will ever have to press the button, but my goodness me, they will know that they are there.”

The Bill made an unexpected return to the Commons for consideration of Lords amendments which had proposed the introduction of a relative price cap on household bills.

Energy Minister Claire Perry told MPs the House of Lords amendments were not an “appropriate solution” to the issue of pricing.

She said: “Instead the Government proposes amendments which will ensure that Ofgem must conduct a review before the end of the price cap period into the pricing practices of suppliers and in particular identify whether there are categories of customers who are currently paying or will be at risk of paying excessive charges for standard variable and default tariffs.”

The legislation will require the regulator Ofgem to protect consumers by capping domestic standard variable and default tariffs until 2020.

The Bill enables the temporary price cap to remain in place until 2023 if conditions for effective market competition are not met.