The energy regulator has scrapped the Prime Minister’s plans to hit the UK’s largest energy companies with a market-wide cap on bills, in favour of measures to boost competition.

Ofgem responded to the political pressure to tackle rising retail prices with a price cap for around 2m vulnerable customers getting a “poor deal”.

The intervention stops far short of a price fall for 17m homes promised by the Conservatives ahead of the election, leading to confusion within the party and relief within the industry.

Theresa May’s campaign resurrected a Labour party pledge from 2013 by pledging to knock £100 off annual energy bills by capping prices, sparking renewed outrage from energy companies which typically make only £70 of profit from an annual bill.