British energy market regulator moves to quarterly price cap review

British energy market regulator Ofgem said on Thursday it would review a price cap on domestic energy prices quarterly rather than twice a year, aiming at reducing risk of supplier failures and cost increases for consumers.

British energy market regulator Ofgem said on Thursday it would review a price cap on domestic energy prices quarterly rather than twice a year, aiming at reducing the risk of supplier failures and cost increases for consumers. Volatility in wholesale power and gas markets is seen lasting longer than previously expected, with much higher prices for gas and electricity than ever before.

"Today's change will go some way to provide the stability needed in the energy market, reducing the risk of further large-scale supplier failures which cause huge disruption and push up costs for consumers," Ofgem said. "It is not in anyone's interests for more suppliers to fail and exit the market," it added.

The cap, which has been in place since January 2019, reflects the cost of energy supply by setting a maximum that suppliers can charge per unit of energy and limits the level of profits an energy supplier can make to 1.9%. Price caps will be updated more frequently so prices charged to bill-payers better reflect current gas and electricity costs, allowing suppliers to better manage risks, Ofgem said.

"Paying a rate that is up to six months out of date in the current changeable market is no longer sustainable and could mean either consumers paying too much for months if wholesale prices have fallen or suppliers left unable to supply gas with the money they are allowed to charge if prices have risen," it said. Around 30 suppliers, mostly of small to medium size, have failed since last year.

Ofgem warned that customers faced a challenging winter ahead. As a result of climbing wholesale prices, the cap will have to increase and Ofgem will publish the next price cap level at the end of August.

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