UK's energy regulator proposes quarterly price cap reviews

Britain's energy regulator Ofgem said on Monday it planned to review a price cap on consumer bills every quarter rather than twice a year to reflect the volatile price swings in the market and help prevent more suppliers from going bust.


Reuters | London | Updated: 16-05-2022 15:45 IST | Created: 16-05-2022 15:31 IST
UK's energy regulator proposes quarterly price cap reviews
Ofgem
  • Country:
  • United Kingdom

Britain's energy regulator Ofgem said on Monday it planned to review a price cap on consumer bills every quarter rather than twice a year to reflect the volatile price swings in the market and help prevent more suppliers from going bust. Britain introduced a price cap in 2019 to prevent companies from overcharging consumers but more than 25 suppliers collapsed last year squeezed by record-high wholesale energy prices and with the cap preventing them from passing on costs to customers. Ofgem said moving to a quarterly review would mean the cap is more reflective of current market prices and any price falls would be delivered more quickly.

"Should prices start cooling off again those changes will be passed back through to consumers as soon as possible," Dan Norton, Ofgem price cap deputy director said in a press briefing. The price cap was raised 54% in April to an average of 1,971 pounds a year to reflect soaring global gas prices last year following the reopening of the global economy from COVID-19 lockdowns.

The cost of finding new suppliers for customers whose companies had gone bust also accounted for around 10% of the April price cap increase or 68 pounds a year. "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," Ofgem said in a statement.

British wholesale gas prices hit fresh record highs following Russia's invasion of Ukraine and have remained elevated due to fears over disruption to Russian gas supplies to Europe. "Things are going to get tougher as far as we can see, it's not certain... But we have to warn customers to expect further price rises in October," Ofgem Chief Executive Jonathan Brearley said on Sky News on Monday.

Analysts expect the cap to rise again in October, by more than 30% to an average of 2,595 pounds a year latest forecasts from Cornwall Insights showed. Ofgem will now launch a new consultation on the plan with the industry. The price cap will change in October and if a quarterly review is adopted it would be introduced in January.

Ofgem's Norton said it was too early to predict whether another price cap rise was likely in January.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Give Feedback