Theresa May has pledged to take further action to prevent consumers being 
“overcharged” by big business as a price cap comes into force on gas and electricity for millions of homeowners.

A limit on how much those on default and standard variable tariffs (SVT) pay comes into effect today in a move regulator Ofgem believes will save households around 
£75 per year, on average.

The £1,137 annual cap will stay in place until 2020 and could be extended to 2023 if the energy market does not become competitive enough, with the Government saying it will cut the amount customers overpay to the “Big Six” by around £1 billion per year.

Mrs May said: “Our energy price cap will cut bills for millions of families and people across the UK who have been ripped off by energy companies for far too long. From today, money will go straight back into the pockets of loyal consumers, including the elderly and those on lower incomes who feel the pinch more acutely.

“But work to tackle this issue doesn’t stop there. We’re working with regulators and industry to ensure that consumers are not unfairly overcharged in the future – whether on their phone bills or their insurance premiums.”

The cap follows an announcement by the competition watchdog before Christmas on reforms to the way the insurance, mortgage, mobile phone and broadband markets 
operate after finding loyal customers were being ripped off to the tune of £4bn.

Following a “super complaint” by Citizens Advice, the Competition and Markets Authority investigated concerns that companies penalise existing customers by charging them higher prices than new customers.

It also found that vulnerable people, including the elderly and those on a low income, may be more at risk of paying the loyalty penalty.

The energy price cap, brought into law in July in the Domestic Gas and Electricity Act, has been set at £1,137 per year for a medium domestic dual-fuel customer paying by direct debit. It was brought into law in July in the Domestic Gas and Electricity Act.

But the amount paid will depend on usage, as the cap limits charges per unit of power rather than bills.

Ofgem is to review the cap every six months, and will enforce the first review in February in April, as consumer groups already warn it could rise.

Ofgem chief executive Dermot Nolan said the cap would ensure consumers “pay a fair price to heat and light their homes”.

But consumer group Which? warned before Christmas that cheaper energy deals were vanishing from the market ahead of the cap.

Its analysis in December found just eight tariffs cost less than £1,000 a year compared to 77 dual-fuel tariffs in January.

Alex Neill, Which? managing director of Home Products and Services, said: “The energy price cap can only be a temporary fix. What is now needed is real reform to promote competition, innovation and improved customer service in the broken energy market”.