The price cap, which Ofgem said would save 11 million households on default deals about £75 on average, removes uncertainty that has weighed on the energy market.
The cap - to be introduced at the end of December - will limit profiteering suppliers to charging a maximum £1,136 a year for a typical dual-fuel energy customer paying by direct debit.
The price cap of £1,136 is provisional and will be confirmed in November by the regulator.
"The price cap is created to be a temporary measure, in place until 2023 at the latest", the watchdog said.
Mr Nolan also said that in addition to the tariff cap, United Kingdom households could make further savings by shopping around for better deals.
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Both Prime Minister Theresa May's Conservative government and the Labour opposition have backed the price cap after evidence that utilities were overcharging their customers. It will then stay in place until 2023.
"Setting the cap at a level that protects the needs of current and future standard tariff consumers, preserves effective competition in the market and enables efficient suppliers to finance their licensed activities is a challenging task but also an essential objective", he added.
This follows Parliament passing the Government's Domestic Gas and Electricity (Tariff Cap) Act, which became law on July 19 and gives Ofgem a duty and the powers to put the price cap in place. "More than half of United Kingdom adults think the average cost of energy will increase post price cap, as energy companies raise the prices of their best value tariffs in order to offset the impact of the price cap".
"There's nothing the market hates more than a lack of clarity and now the level of the price cap is known analysts can reflect it in their earnings estimates", said Russ Mould, investment director at AJ Bell.
The watchdog's definition is that a typical customer uses 3,100 kilowatts of electricity and 12,000 kilowatts of gas in a year.
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Responding to today's announcement, chief executive of Energy UK Lawrence Slade, said: "There are over 70 suppliers in the energy market who will now be assessing how this impacts their individual business, however for many suppliers this will pose a significant challenge".
British Gas owner Centrica has previously hit out against the energy cap, saying companies need to be able to make money and invest.
And it's on this final point we'd like to look into in a little more detail, specifically because loveMONEY readers tend to be regular switchers in order to keep costs down.
EON SE announced last month it would cut 500 U.K.jobs in Britain ahead of the squeeze on profits expected from the price cap.
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