Energy regulator unveils price cap plans for 'vulnerable' households

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The Bill would see "rip-off" energy prices capped temporarily for millions of householders on standard variable tariffs (SVTs) and default tariffs that customers are moved onto at the end of a fixed-term deal.

The watchdog said it would need legislation in place to enforce a cap on default tariffs.

They argue intervention in the market does not promote competition.

Suppliers reacted with fury as billions of pounds were wiped off the value of their shares after the pledge.

Draft legislation created to lower the cost of energy bills is set to be published by the government later.

"We also expect suppliers to co-operate when Ofgem initially introduces a safeguard tariff for around one million vulnerable households this winter".

"Today's publication of draft legislation is a vital step towards fixing that and in offering crucial peace of mind for ordinary working families all over the country".

"It has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much".

However John Penrose, a Tory MP and former minister, told The Telegraph: "A temporary relative price cap puts the customer in charge, so energy firms compete to offer the best, most creative and attractive deals".

Speaking in the Commons, Business Secretary Greg Clark said the bill would "preserve the ability for the market to act competitively" and "allow for effective competition and to give a reason for people to shop around".

Around a million households who receive the Warm Home Discount should save £120/year on their energy bills when the regulator extends its prepay price cap to some credit meter customers this winter.

Ministers confirmed that energy regulator Ofgem would be compelled to implement the cap once the law had given it new powers. This is created to build cross-party consensus on how the price cap will work.

She said: "Due to the Government's dithering, the four million households in fuel poverty - nearly one million of which includes a disabled person - will face another winter of cold homes and astronomical bills".

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