Martin Lewis says "regulator was given a poisoned chalice" as Ofgem proposes £1,136/yr energy price cap

Ofgem has this morning proposed that the energy price cap for default and standard tariffs be set at £1,136/yr from the end of 2018. 

Martin Lewis, founder of MoneySavingExpert.com, said: "Ofgem has been brave setting the price cap lower than expected. It will mean millions see a noticeable reduction in bills. Yet the regulator was given a poisoned chalice. It is calling this new tariff a ‘fair’ tariff, but that isn’t the same as a good tariff. The savings are still pitiful compared to the amount people would get if they switched and went to the market’s cheapest providers – yet there is a real concern the imposition of a cap will give people a false sense of security that doing nothing is fine.

"In fact, the problem with this price cap is it is a bastardisation of the current market model – which is meant to be about competition. To make that work, and encourage switching, you need big differentials, some will have to pay more than others. The alternative is price regulation, where we simply tell companies what they can charge. We need to pick one and work with it. This is a halfway house between the two, a hodgepodge.

"Already in the run up to the price cap we’ve seen prices concertina – diminishing choice and savings for those who do switch. Two years ago four of the big six firms offered fixed tariffs less than 10% more expensive than the markets cheapest. Now even the best from the big six is nearly 20% more.

"If we are to stick with a competitive market, a blanket price cap is an indiscriminate solution. Instead we need to decide who is and who isn’t an acceptable victim of it. If I – as someone who is web-savvy, affluent and financially informed – chooses not to switch, that’s my problem. If a struggling 90-year-old granny who’s not on the web is too scared to switch, it needs fixing."

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Notes to editors

• See the full details in the MoneySavingExpert.com news story.

• Latest analysis from MoneySavingExpert.com on how the big six energy firms have priced up to the cap for prepay and vulnerable customers was published yesterday and is available here.