Ofgem has today unveiled plans to adjust the energy price cap on a three-month basis compared to six months.
What does the industry think about it?
Significant change for both customers and suppliers
Energy UK’s Director of Advocacy Dhara Vyas said: “Given the costs and disruption caused to customers and the sector by nearly 30 suppliers going out of business since last August, it’s right that Ofgem is looking at whether the design of the current price cap contributed to these difficulties.
“A more frequent price cap should mean the prices consumers pay will reflect any changes in the wholesale cost of energy more quickly.
“Before the April price cap rise, there was a period where it was costing suppliers hundreds of pounds more to buy energy for some customers than they could recoup under the cap – so a shorter price cap period could limit this exposure for companies.
“Alternatively, if the wholesale costs fall, cheaper prices could be passed on more quickly to customers.
“Moving to a three-month price cap will be a significant change for both customers and suppliers so we look forward to working with Ofgem on the details of this proposal.”
The plan would reduce the current protection for customers
Peter Smith, Director of Policy and Advocacy at NEA, commented: “In the short term at least, the changes will be particularly damaging for the poorest households; removing the certainty of the price they will pay over winter. This could cause further immense financial strain and damaging health and well-being as prices soar every few months.
“This change has the aggregate impact of reducing protections for fuel poor households. While the UK Government has the primary responsibility for tackling the energy crisis, Ofgem shouldn’t make things worse and needs to accelerate its ideas for providing greater price protection for those on the lowest incomes.”
He said: “I should have behaved better. My ire’s institutional not individual, it was inappropriate. I lost it when getting a briefing about today’s proposals, where it feels like at every turn, in these desperate times where lives are at risk, it has ignored all asks for consumers and instead kowtowed to the industry.
“I hope history proves me wrong.”