The energy price cap, the mechanism that determines gas and electricity bills for 22 million households, could soon be reviewed every three months under plans announced by the industry regulator.
Ofgem revealed that it was putting the idea out to consultation amid criticism that the current twice-yearly adjustment arrangement – in April and October – had contributed to the failure of suppliers last year at the height of the wholesale gas price shock.
The cap, which was credited with shielding families from the worst of the COVID-linked hikes in raw energy costs, prevented companies passing on the unprecedented increases to their customers.
It delayed the impact from the most damaging element of the cost of living crisis that has seen households forced to swallow unprecedented rises in one go, with the average bill rising by 54%, or £693 annually, from April to £1,971.
The latest forecasts suggest bills could rise to almost £2,600 in October when the next price cap adjustment is due – reflecting the impact of Russia’s war in Ukraine for the first time.
Ofgem said its proposals would enable greater agility: allowing bills to rise or decline more quickly.
“A more frequent price cap 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.
“This change would also help energy suppliers more accurately predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures which ultimately push up costs for consumers.”
It has previously admitted that this proposal would have meant prices going up ahead of the recent April rise.
The consultation means that no cap adjustment is imminent. Ofgem said it planned to bring in the changes from October.
