LONDON (Reuters) - A government plan to cap the most common form of gas and electricity tariffs for millions of British households would not come into effect in time for this winter, energy regulator Ofgem said on Wednesday.
Prime Minister Theresa May stunned the industry last week when she announced a plan to impose price caps on standard variable tariffs (SVT), the basic rate that energy suppliers charge if a customer does not opt for a specific fixed-term deal.
Further details of the government’s proposals are expected on Thursday.
Ofgem chief executive Dermot Nolan said he did not know how long it would take for the government bill to become law, but it would then take around another five months before the regulator could start capping people’s bills.
Around 70 percent of households are on SVTs. May has previously indicated a cap could cut average energy bills by around 100 pounds a year.
Once the law is passed, Ofgem would need to launch a statutory consultation process of around 50-60 days and then allow energy suppliers further time to implement the measure, meaning it could not be in place this winter.
“I cannot comment on next winter as it depends how quickly the bill will go through,” Nolan told journalists during a telephone briefing.
Ofgem had already proposed intervening in the part of the market that supplies more vulnerable customers. A new scheme for this sector would protect around 1 million households next February, it said.
The regulator is also working on plans to extend its price protection plan to a further 2 million vulnerable households by next winter, but Nolan said this would be dependent on the timing of the government’s legislation.
Ofgem said it would now consult the industry on its safeguard tariff for SVTs while the government’s draft bill passes through parliament, and said suppliers in the meantime must step up efforts to provide better value deals.
Britain’s energy market is dominated by the so-called big six providers -- Centrica’s (CNA.L) British Gas, SSE (SSE.L), Iberdrola’s (IBE.MC) Scottish Power, Innogy’s npower (IGY.DE), E.ON (EONGn.DE) and EDF Energy (EDF.PA), which account for about 85 percent of the retail electricity market.
Editing by Paul Sandle and Keith Weir