The energy bills of more than 11m households will be cut by around £75 a year on average under a price cap being imposed by the energy regulator, Ofgem, over concerns that loyal customers are being ripped off.
However, those on the single most expensive default tariff of the big six will save £121, allowing the government to claim it has achieved its pledge.
By contrast, those on the cheapest default tariff offered by the large suppliers will save only £60. Collectively, the saving will be around £1bn.
From the end of this year the upper limit for default tariffs, known as standard variable tariffs (SVT), will be set at £1,136, based on typical fuel consumption, Ofgem said on Thursday.
The average of the big six’s SVTs is £1,220. That figure is likely to rise soon, however, as two key players, Npower and SSE, are expected to announce a second price rise this year.
Dermot Nolan, the energy regulator’s chief executive, said: “Ofgem has made full use of the powers parliament has given us to propose a tough price cap which will give a fairer deal to consumers on poor-value default tariffs.”
Labour’s Rebecca Long-Bailey, the shadow business secretary, said that while the price cap was “a start”, it was less than promised.
“Theresa May promised 17m households would be better off by up to £100. Today’s announcement is a smaller saving for fewer people. Despite promises from the prime minister, the government has continued to sit on their hands while the big six have hiked prices. Tory dithering means that millions of customers will now be even worse off than when Theresa May first made her promise.”
The level of the cap will be able to move up or down every six months. It will depend on costs facing suppliers, such as the wholesale price of gas and electricity, which has been rising this year.
Nolan said he would ensure “any rise will be due to genuine increases in energy costs rather than supplier profiteering”.
However, he said the biggest savings for households would still come from switching suppliers.
It remains to be seen whether the big suppliers will all bunch their prices together just below the cap.
Under a narrow cap for 5m vulnerable households, all six have priced their tariffs at the same, maximum level allowed.