Ofgem plans to review Energy Price Cap every 3 months instead of half a year

May 27, 2022 | Bills, Electricity & Gas

Ofgem, the UK’s energy market regulator, revealed plans last week to begin adjusting the energy price cap every three months instead of every six – meaning there could be price reviews coming July and January. 

Setting up energy? Get clear answers about the price cap and recommended suppliers in a free call with Please Connect Me

What is the Energy Price Cap?

Ofgem’s Energy Price Cap is the maximum amount a supplier is allowed to charge an “average user” for their gas and electricity in a year. Its purpose is to protect consumers from over expensive tariffs. Currently, the price cap is reviewed twice a year in April and October.

In last month’s review, the energy price cap jumped 54% from £1,277 to £1,971 per year, affecting 22 million homes across the UK.

 

What is being proposed?

The Energy Price Cap level would now change every three months instead of every six months

There would be a slight reduction in the amount of notice suppliers get of the new price cap level

Source: Ofgem

 

What happens when the price cap is reviewed more regularly? 

Ofgem has said a more regular review of energy prices  “would reflect the most up to date and accurate energy prices and mean when prices fall from the current record highs, customers would see the benefit much sooner. “ 

CEO of Ofgem, Jonathan Brearley explained, “The last year has shown that we need to make changes to the price cap so that suppliers are better able to manage risks in these unprecedented market conditions.”

A more frequently reviewed price cap would mean energy suppliers can make better predictions for the quantity of energy they purchase, lowering the risk of business failures – which either increases costs for customers or leads energy firms to go bust.

Since the beginning of 2021, almost half of the UK’s energy firms have gone bust, including Bulb, Avro, Green, People’s energy, Utility point, and many other smaller suppliers. The energy price cap at the time was not reflecting skyrocketing gas wholesale prices (which had jumped a whopping 250% at that point), so firms were forced to sell energy to consumers at a huge loss, and eventually enter Special Administration Regime (SAR).

 

What does this mean for my energy bills?

For customers, this means there could potentially be more fluctuation in bills this year as prices will come down as quickly as they go up. If the energy wholesale prices descend, customers (not on fixed tariffs) will benefit from lower prices more quickly; however, if energy prices soar again, there won’t be much protection for long.

The consultation for the new price cap reviewing system will be open until Tuesday 14 June 2022. Ofgem is looking to implement these reforms coming October.

 

More on bills:

77 ways to save energy at home

77 ways to save energy at home

With energy costs and household bills climbing rapidly, you've asked us to collect a list of easy ways to save energy at home. Below, you'll find our top tips for reducing your gas and electricity use throughout your house. Read on for ways to save hot water, make...

read more
How much will the 2024 TV licence cost?

How much will the 2024 TV licence cost?

As households draw up their budgets for the new year, the BBC has announced that the 2024 TV licence fee will rise by 9%. The new annual cost of £173.30 or £14.44 a month has come under criticism from the government as being 'very high'.   How much will my bills...

read more
Should I move to a home with a Heat Pump?

Should I move to a home with a Heat Pump?

More and more movers are looking for energy-efficient homes, and a heat pump is at the top of many wishlists. There are several factors driving people to move into greener properties. A recent survey by Knight Frank found that 35% of home buyers would look for a more...

read more

Never stress about moving again.

Get all your utilities sorted, for free.

Start now
Never miss an offer again!
Exclusive offers & money saving tips
Email
Name
FB
IG

© Please Connect Me

Privacy Policy | Terms & Conditions

Our Services
Connectivity
Energy
Broadband
TV
Mobile
Insurance
FX
Cleaning
Company
About us
Testimonials
Careers
Help

Blog

Support centre
Cookies settings
Sign up to our newsletter
For exclusive offers, money saving tips & more
Email
Name