Ofgem, the government regulator for gas and electricity markets in Great Britain, proposed on Thursday a price cap on energy bills, which would save consumers who use a typical amount of gas and electricity around £75 per year on average.
"Over 11 million more households on poor value default tariffs would be protected from being overcharged under proposals announced by Ofgem," a press release read.
This follows Parliament passing the government's Domestic Gas and Electricity (Tariff Cap) Act, which became law on July 19 and gives Ofgem a duty and the powers to put the price cap in place.
"Ofgem is working to have the cap in place by the end of the year," the statement added.
According to Ofgem, when the price cap is introduced, suppliers will have to cut their prices to the level of or below the cap, proposed to be £1,136 per year for a typical dual fuel customer paying by direct debit, forcing them to scrap excess charges for people on poor value default deals.
The exact savings each individual household would make will depend on the price of their current deal, how much energy they use, whether they have both gas and electricity and how they pay for their energy.
According to the statement, many consumers on default deals -- over half of all households in Great Britain -- use more energy than a typical household so their savings would be higher, while those who buy their electricity and gas from different suppliers would also save more.
"A typical consumer on the most expensive tariffs would save over £120. In total, the price cap would save consumers around £1 billion," it said.
Dermot Nolan, chief executive of Ofgem, reassured consumers that any decreases in energy costs would be passed on to them.
"And if costs increase, Ofgem will ensure that any rise will be due to genuine increases in energy costs rather than supplier profiteering," he added.
According to the statement, the first update of the price cap will be announced in February 2019 and come into effect in April 2019. Following this, it will be updated every six months to reflect the latest estimated costs of supplying electricity and gas.
"The price cap is designed to be a temporary measure, in place until 2023 at the latest. This will allow Ofgem to put in place further reforms to make the energy market more competitive and work better for all consumers, including making switching energy supplier easier, quicker and more reliable," Ofgem said.
By Hale Turkes