Energy customers will automatically be switched to a cheaper rate at the end of their contract as part of the government’s plans to end so-called “loyalty penalties”.
The crackdown on “fraudulent tariffs” will see the introduction of a new “opt-out switching” system, in which consumers will automatically be subscribed to a new competitive offer at the end of their initial contract.
The landmark move, which is expected to be announced in a white paper next week, is to prevent energy companies from imposing “loyalty penalties” – when long-time customers face worse rates than new customers or new customers. who try to renegotiate the amount they pay.
It is part of a package of measures to clean up Britain’s energy system, boost green jobs and keep bills affordable as the country moves towards net zero emissions by 2050.
Alok Sharma, the business secretary, will also announce next week that the warm-back scheme, which cuts electricity bills for eligible retirees and low-income households by £ 140, will be extended until 2026.
It will cover an additional 750,000 households, meaning that nearly three million households in total will be eligible.
In addition, major investments will be made in offshore wind, clean hydrogen, carbon capture and storage, and advanced nuclear.
A source from Whitehall said: ‘This government is revolutionizing the way the UK powers its homes, buildings and industry – but we are also revising the system in favor of the consumer.
“We don’t believe energy companies should be able to renew contracts indefinitely or punish long-standing loyal customers.
“That’s why we’re going to make it even easier for people to switch to cheaper rates and lower their bills so they can keep more money in their pocket.”
The measures come after the introduction of a £ 2bn green house grant in September, which allows people on the lowest incomes to insulate their homes with measures such as cavity wall insulation, protection against drafts and double glazing.
This week, the government also pledged to make the UK the first major economy to end support for overseas fossil fuel projects.
This weekend, the UK is co-hosting an international climate summit in line with the UN to accelerate greenhouse gas reduction ambitions.
Prime Minister Boris Johnson said in his remarks: “We want to make the UK the Saudi Arabia of wind power generation – enough wind power by 2030 to power each of our homes with electricity.
“We want the UK and London to be the natural home of green finance, we want our homes to gradually emit less and less CO2 with more home renovations.
“Whatever the UK is accused of falling behind, we will not be left behind.
“We don’t do this because we’re green freaks wearing t-shirts and mung beans hugging the trees – even though I have nothing against any of those categories and mung beans are probably delicious.” .
“We are doing this because we know that scientific advancements will allow us, collectively as humanity, to save our planet and create millions of highly skilled jobs as we recover from Covid. ”
The measures currently in place to fight against “loyalty penalties” include an energy price cap set by Ofgem, the energy regulator, and reviewed twice a year.
This cap limits the amount that energy suppliers can charge for their standard variable tariffs. The current cap is £ 1,042 per year and went into effect on October 1.
Peter Earl, head of energy at comparethemarket.com, said: “The plans could offer a radical disruption to the current energy system, which, if fully implemented, could be of tremendous benefit to many of the remaining households. loyal to their supplier.
“Millions of households are stuck on an energy supplier’s standard variable tariff, probably paying hundreds of pounds more than they should be.
“We are, however, skeptical about plans for an ‘opt in / opt out’ system to change tariffs with the same supplier, which could prevent people from looking for a better deal with alternative and more competitive suppliers.
“If these changes are not implemented properly, they risk giving people a false sense of security that they are receiving the cheapest rate, despite better deals being available elsewhere.”