More than 11 million households will save a combined £1 billion a year under plans to cap gas and electricity tariffs at £1,136, the energy watchdog has announced.
Ofgem said each typical customer would save around £75 a year on average, with those on the most expensive default standard variable tariffs saving more than £120 a year when the cap comes into effect.
It has proposed to set the cap for the typical dual fuel customer paying by direct debit at £1,136 a year, forcing suppliers to cut prices to that level or below.
The regulator, which was given legal powers by the Government in July to introduce the cap, hopes to have the measures in place by the end of the year.
‘A tough price cap’
Dermot Nolan, Chief Executive of Ofgem 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.
"Once the price cap is in place, all households in Great Britain covered by the cap will be protected from being overcharged for their energy.
"Consumers can have confidence that falls in energy costs will be passed on to them and if costs increase, Ofgem will ensure that any rise will be due to genuine increases in energy costs rather than supplier profiteering.
"Households protected by the cap will be able to save even more money by shopping around for a better deal."
Business and Energy Secretary Greg Clark said: "We have always been clear and determined that the injustice found by the CMA that loyal customers were being exploited must end.
"This Government is delivering on its promise to end that injustice and protect households across the country from unjustified price rises.
"Today's announcement from the independent regulator setting out the detail of the Government's price cap will mean that households can have confidence that when energy costs fall their bills will too."