Ofgem has confirmed that the energy price cap will be updated four times a year, rather than twice as it warned that customers face a “very challenging winter ahead”. The regulator said the change would go “some way to provide the stability needed in the energy market."
It said Russia’s actions in Ukraine had led to volatility in the global energy market experienced last winter lasting “much longer, with much higher prices for both gas and electricity than ever before”. As expected, Ofgem warned that as a result of the market conditions, the price cap would have to increase later this month to reflect increased costs.
However it said that the changes would mean that any fall in wholesale prices would be passed on in full to customers and more quickly with the quarterly price cap. Ofgem chief executive Jonathan Brearley said: “I know this situation is deeply worrying for many people.
"As a result of Russia’s actions, the volatility in the energy markets we experienced last winter has lasted much longer, with much higher prices than ever before. And that means the cost of supplying electricity and gas to homes has increased considerably.
“The trade-offs we need to make on behalf of consumers are extremely difficult and there are simply no easy answers right now. Today’s changes ensure the price cap does its job, making sure customers are only paying the real cost of their energy, but also, that it can adapt to the current volatile market.
“We will keep working closely with the government, consumer groups and with energy companies on what further support can be provided to help with these higher prices.”
Mr Brearley later confirmed to BBC Radio 4’s Today programme that Ofgem was looking at taking money off standing charges, but warned that trade-offs were involved and “there aren’t easy answers in the market right now”.
Changes to the price cap come as household energy bills are likely to remain at more than two-and-a-half times their pre-crisis levels until at least 2024, according to latest predictions. Cornwall Insight, one of the country’s most respected energy consultancies, said bills will hit a staggering £3,359 per year from October for the average household, and not fall below that level until at least the end of next year.
The price cap on energy bills, which regulates what 24 million British households pay, will hit £3,616 from January and rise further to £3,729 from April, it said. It will begin to fall after that, but only slowly, reaching £3,569 from July before hitting £3,470 for the last three months of 2023.
The latest predictions are hundreds of pounds above previous forecasts from Cornwall Insight, but are slightly lower than those another consultancy, BFY, has predicted. In May, the government announced an energy costs support package – worth £400 per household – in response to predictions that bills would rise to £2,800 for the average household in October.
The package also promised extra support for more vulnerable households.
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