Ofgem said extending its prepayment safeguard tariff, which it introduced for more than 4 million households on prepayment meters last April, would save low income families an average £120 on their annual dual fuel bill.
It will work on extending price protection to at least a further 2 million households for winter next year, once the timing of a price cap is confirmed.
Prime Minister Theresa May has pledged to put a ceiling on standard variable tariffs (SVTs) – poor value rates that about two thirds of consumers are on because they have not opted for a specific fixed-term deal – which could cut average energy bills by £100 a year.
Ofgem said it would have to wait for legislation to be brought in, after which it could be months before it could start capping bills.
CEO Dermot Nolan urged suppliers to step up efforts to get more of their customers off default tariffs and onto better deals.
Yesterday the regulator introduced new rules enabling suppliers to roll customers coming to the end of their contracts onto another fixed deal instead of an SVT but warned that it would be monitoring any new default deals to ensure they “do not become another way to penalise those who rarely switch”.
Nolan said: “Ofgem shares the Government’s concern that the energy market is not working for all consumers and is determined to reduce the detriment suffered by those overpaying for their energy, particularly the vulnerable. The introduction of further price protections will give time for Ofgem’s reforms to work and for smart meters to be rolled out across the country as we move towards a smarter, fairer, more competitive market.”
The UK’s biggest energy supplier, British Gas owner Centrica, said: “We agree that more vulnerable customers should receive price protection, beyond those on prepayment meters. We welcome Ofgem’s intention to change the default mechanism and to permit different default tariffs other than the SVT.”
Richard Neudegg, head of regulation at price comparison site uSwitch.com, said: “It’s competition that drives prices down, not caps. Consumers must not be lulled into a false sense of security.”