Ofgem to press ahead with price caps after CMA's 'watershed' report

The energy regulator Ofgem is to go ahead with plans to introduce a price cap on pre-payment meters following a report by the Competition and Markets Authority which put forward ways it thought the market could be improved for customers.

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

The CMA’s two-year investigation, which concluded last month, confirmed that two thirds of households are disengaged and paying over the odds for their energy compared to those who have switched tariff.

Ofgem will work closely with suppliers to help disengaged customers, who remain on expensive standard variable tariffs, to shop around and save money. In particular it will trial more effective prompts on customers’ bills to encourage them to compare tariffs. Next year the energy regulator will pilot the database service, which will allow suppliers to offer disengaged customers better value deals.

But First Utility's managing director Ed Kamm told the BBC he thought the plans were in danger of helping the wrong people. "Ofgem itself admits that consumers who are already engaged in the market will see the first benefits," he said. "We are in real danger of continuing to fuel a 'tale of two markets' - helping those who already shop around and doing little to properly help those who are continuing to pay much more than they need to or should."

The big six currently supply energy to around 90 per cent of domestic customers in the UK and generate about 70 per cent of electricity output.

A spokesperson for Eon said: “As with the publication of the CMA report, we will now review Ofgem’s proposals in detail to fully understand the implications for our customers.”