Energy price cap: British Gas owner Centrica wins appeal against Ofgem

Centrica applied for a judicial review after the regulator announced a change to the methodology used to set the opening price cap of £1,137 a year at the beginning of January

The Big Zero report

British Gas owner Centrica has won a legal challenge against the way Ofgem calculated a part of its energy price cap.

The energy giant applied for a judicial review after the regulator announced a change to the methodology used to set the opening price cap of £1,137 a year for a typical household at the beginning of January this year.

Centrica previously said that had led to a one-off cost increase of £70 million for British Gas in the first three months of 2019.

It welcomed the judgment of the court and said the outcome underlines the importance of “transparent and rigorous regulatory processes” to ensure well-designed regulation that is in the interest of a well-functioning energy market.

Centrica added in a statement: “We welcome the judgment of the court regarding the treatment of wholesale costs that energy suppliers incur to serve their customers, and the court’s assessment of the wholesale costs applicable to the first period of the energy default tariff cap.

“We look forward to continuing to work closely with the government and the regulator on the development of future policy and we remain committed to delivering for our customers’ changing needs, including through our involvement in the transition to a lower carbon future.”

Ofgem said it is “disappointed” by the judgment and that its overarching objective was to set the cap “at a level that protected customers”.

A spokesperson added: “The judgement does not change the fundamentals of the price cap, which remains in place and will continue to protect 11 million households on default deals, ensuring that they pay a fair price for their energy.

“We our considering our next steps in light of the judgment.”

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