Ministers are planning crackdown on ‘rip-off’ energy firms over expensive penalties for loyal customers
- Alok Sharma expected to announce moves in crack down on energy companies
- Many switch customers to more expensive standard rates when contracts end
- Legislation to regulate new energy-saving smart meters is also being considered
Ministers are planning to crack down on ‘rip-off’ energy firms as part of a major overhaul of the UK’s energy market.
Business Secretary Alok Sharma is tomorrow expected to announce moves to stop energy companies from punishing longstanding customers with expensive tariffs – known as the ‘loyalty penalty’.
Many firms offer their cheapest deals to new customers but then automatically switch them to more expensive standard rates when the contracts end.
Officials are also considering legislation to regulate the new energy-saving smart meters amid fears they could be vulnerable to ‘hacking’ by foreign powers.
Business Secretary Alok Sharma (pictured) is tomorrow expected to announce moves to stop energy companies from punishing longstanding customers with expensive tariffs
The plans have been drawn up as part of preparations for the Government’s new Energy White Paper, which is a blueprint for reforming the UK’s energy industry after a commitment was made to reach net zero emissions by 2050.
The paper will also set out plans for major investment in offshore wind, clean hydrogen, carbon capture and nuclear power, supporting up to 220,000 skilled jobs in industrial areas such as Merseyside, the Humber and Teesside.
There is also support for pensioners and low-income households through a five-year extension of the Warm Home Discount Scheme, which knocks £140 off annual electricity bills.
The extension to 2026 will mean three million households benefit from the discounts.
Industry estimates suggest 12 million households are overpaying by hundreds of pounds, adding more than £2 billion to UK energy bills each year.
But the Government’s reforms mean energy firms will no longer be able to switch customers to more expensive tariffs without their consent.
Instead, when contracts come to an end, energy firms will either have to give customers the choice to opt-in to a cheaper tariff or automatically switch them to a competitive new deal.
A Whitehall source said: ‘We do not believe that energy companies should be able to roll over contracts indefinitely or punish longstanding, loyal consumers.’
The move follows lobbying by renewable energy firm Bulb, which urged Energy Minister Kwasi Kwarteng this month to end the ‘unacceptable situation’.
Bulb’s chief executive Hayden Wood last night welcomed the shake-up, which has been described as similar to plans by the FCA City watchdog to outlaw the practice of ‘price-walking’ on home and motor insurance contracts, which sees longstanding customers who renew their annual premiums charged more than new customers.
Officials are also considering legislation to regulate the new energy-saving smart meters amid fears they could be vulnerable to ‘hacking’ by foreign powers (file photo)
Mr Wood said: ‘Millions of loyal households have paid hundreds of pounds over the odds this year through no fault of their own.
‘You’d be shocked if your local coffee shop started charging you more because you’re a regular – it should be no different with energy companies.
‘We want greater fairness and transparency in the energy market and this is an important step to getting there.’ In September, the £2 billion Green Homes Grant handed low-income families grants of up to £10,000 to insulate their homes, which can knock up to £500 off annual energy costs.
The Whitehall source added: ‘The Government is revolutionising the way the UK powers its homes, buildings and industry – but we are also overhauling the system in favour of the consumer.
‘That’s why we’re going to make it even easier for people to switch to cheaper tariffs and drive down bills so they can keep more money in their back pocket.’