Yahoo Finance Energy bills: Ofgem plans frequent price cap reviews
Britain's energy regulator Ofgem unveiled new plans on Monday to review the price cap more frequently throughout the year to ease the cost of living crisis for UK households as bills soar.
The watchdog proposed to update the energy price cap, which regulates bills for 23 million households, every three months rather than every six months from October.
The energy price cap has been credited with protecting UK families from the volatility of prices after coronavirus measures were eased and Russia's invasion of Ukraine pushed up wholesale gas prices.
Monday's announcement comes after the cap jumped 54% last month and average bills rose by £693 ($847) a year for around 18 million households on standard tariffs, and £708 for 4.5 million prepayment customers.
Prices are forecast to rise to more than £2,600 a year in October when the cap is next reviewed.
MoneySavingExpert.com founder Martin Lewis accused the energy watchdog of "selling consumers down the river" on Monday. Lewis then apologised to consumers on Twitter for swearing at Ofgem staff as he condemned proposed changes to the energy price cap.
He wrote: "I'd like to formally apologise to the Ofgem staff for losing my rag in a background briefing just now and saying its changes are a "f***ing disgrace that sells consumers down the river".
"I should've behaved better. My ire's institutional not individual, it was inappropriate".
Lewis said the changes benefit the industry more than consumers. "My breaking point was when hearing how instead of listening to calls to scrap its proposed market stabilisation charge, it was making it harsher to really 'stop the harmful effects of competition' i.e staggeringly its aim's to effectively STOP firms undercutting the price cap", Lewis added.
Other changes proposed by Ofgem could also render energy companies less able to offer lower and more competitive prices due to changes to the market stabilisation charge.
Read more: 'F***cking disgrace': Martin Lewis condemns energy watchdog for 'selling consumers down the river'
The summer price cap started from 1 April and will expire on 31 September 2022. The cap, currently at a record £1,971 a year for the average household, outlines the maximum amount firms can charge for energy.
Adjusting it more regularly would reflect the most accurate prices and would help pass on savings more rapidly to consumers when energy costs fall from the current record highs, Jonathan Brearley, CEO of Ofgem told BBC's Today programme on Monday.
Brearley said Ofgem will also take measures to financially regulate companies "much more closely" so that they are more resilient to survive the economic shock facing the market. He said companies regulated by Ofgem have not made "unfair profits" in the past five years.
The surging costs of wholesale natural gas, exacerbated by the war in Ukraine, has driven energy bills to record highs over the last year and led to the collapse of at least 30 companies. This has forced energy firms to sell supplies for less than they pay due to the cap and amid continuing pressure on gas supplies.
Changing the price cap more often, will enable the watchdog to make it more reflective of international gas prices, protecting under-pressure firms from being damaged.
"Our retail reforms will ensure that consumers are paying a fair price for their energy while ensuring resilience across the sector," Brearley said.
Read more: Profits at British Gas owner Centrica to rise as it cashes in on higher energy prices
Brearley added: "Our top priority is to protect consumers by ensuring a fair and resilient energy market that works for everyone. Our retail reforms will ensure that consumers are paying a fair price for their energy while ensuring resilience across the sector.
"Today’s proposed change would mean the price cap is more reflective of current market prices and any price falls would be delivered more quickly to consumers.
"It would also help energy suppliers better predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures, which ultimately pushes up costs for consumers.
"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."
