Just a few days before the announcement of the winter energy price cap, Ofgem has confirmed that the cap will be updated every three months instead of every six months.
Following a consultation, the regulator has decided this is the most effective way to protect customers and energy suppliers from price shocks.
Ofgem believes the quarterly price cap will help to see and reflect changes in the market more quickly compared to the existing price cap.
Jonathan Brearley, Chief Executive of Ofgem said: “I know this situation is deeply worrying for many people. As a result of Russia’s actions, the volatility in 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.”
Responding to news today that Ofgem will review the price cap every three months, Gillian Cooper, Head of Energy Policy at Citizens Advice, said: “With the cost of energy only going in one direction right now, many will be worried by the idea of seeing even more frequent price changes.
“Something that’s added to all our bills is the cost of supplier failures. Changing to a quarterly price cap should limit the risk of any more suppliers going bust, which is a good thing. But our bills are already incredibly high and still rising.”
Responding to the announcement, Peter Smith, Director of Policy and Advocacy at charity National Energy Action, said: “Ofgem moving ahead now with passing price cap changes on to households quarterly rather than every six months, was not necessary and unfortunately means further significant price increases in January are inevitable.
“Average annual bills are already predicted to increase by £1,200 a year – a 177% increase since last October. Now, householders can expect further hikes just after Christmas, in the middle of heating season when energy costs are typically at their highest.
“January is also usually a time of increased mental health problems and further hikes in bills will sadly lead to increased misery and huge anxiety for energy consumers across Britain, particularly for poorest households.
“It’s disappointing that Ofgem has not listened to these concerns.”
Simon Francis, End Fuel Poverty Coalition Co-ordinator, commented: “Ultimately, this decision will force more people into fuel poverty in the middle of winter, causing additional stress on the NHS and it may ultimately lead to increased levels of excess winter deaths this year. It is simply inhumane.”
Amy MacConnachie, Director of External Affairs at the Association for Renewable Energy and Clean Technology, said: “The theory behind Ofgem’s price cap announcements is understandable, but we do have major concerns about what impact this will have in reality.
“From a supplier point of view, this will give greater protections to ensure that fluctuations in wholesale prices are matched by the price cap.
“However, for consumers, this could be devastating – to face two price hikes over the winter months will hit many households and businesses incredibly hard.”