Ofgem said today that the energy price ceiling would henceforth be revised every three months rather than every six months, citing the “extremely hard winter ahead” for households.
According to the energy regulator, the move to quarterly revisions ensures that “prices paid to bill-payers are a better representation of actual gas and electricity costs.”
This will enable “energy suppliers to better manage their risks, creating a more secure market and helping to keep costs down for everyone,” Ofgem continued.
The energy price cap update schedule modification, according to the London-based regulator, “will go some way to provide the stability needed in the energy market.”
However, charities cautioned that while the shift in frequency may lower expenses over the long run, it “does the reverse of assisting this winter—in the heart of an energy crisis.”
Others wrote that Ofgem has to be “brought under control” and “isn’t fit for purpose” and that “a price cap every three months is essentially not having a price cap.”
Ofgem stated that it also wants to “lower the possibility of more large-scale supplier failures,” adding that “it is not in anyone’s interests for more suppliers to fail and quit the market.”
Although Britain only purchased a modest amount of Russian gas as a result of Russia’s activities last winter, the regulator continued, the market instability that resulted in substantially higher gas and power prices than ever before had persisted far longer.
Ofgem also issued the anticipated warning that the price cap will need to increase in order to reflect rising costs as a result of the market circumstances.
The conclusion of this month will see the release of the next price cap level.
Jonathan Brearley, the CEO of Ofgem, said: “I realize this situation is profoundly concerning for many people. The energy market instability we witnessed last winter has lasted far longer and resulted in much higher prices than ever before as a result of Russia’s activities.
‘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.’
According to the most recent projections, home energy costs will likely stay at levels that are more than 2.5 times higher than they were prior to the crisis until at least 2024.
According to Cornwall Insight, one of the most reputable energy consultancies in the nation, typical family costs will start at a startling £3,359 per year in October and won’t go down below that level until at least the end of next year.
24 million British families are subject to a price ceiling on energy bills, which will increase to £3,616 starting in January and to £3,729 starting in April, according to the report.
After that, it will gradually start to decline, reaching £3,569 in July before falling to £3,470 in the final three months of 2023.
The most recent expectations are far higher than Cornwall Insight’s earlier estimates, although they are somewhat behind those of BFY, another consultant.
In May, the government responded to forecasts that home energy prices will increase to an average of £2,800 by October by announcing an energy expenses relief package of £400 per household.
Additionally, the package promised greater assistance for homes in need.
Cornwall Insight forecast last month that annual energy costs would normally increase to £3,244 in October and £3,363 in January, but things have altered a lot since then.
The most recent predictions follow the Kremlin’s increased restriction of the gas supply to Europe.
Although the UK imports very little of its gas directly from Russia, events on the continent as a whole impact the price paid here.
If the projections come true, they will impose a great deal of stress on already overburdened households.
It would almost double the current record price ceiling, which is already hundreds of pounds more than the previous high at £1,971.
Analysts already have the majority of the data they need to properly anticipate October’s growth, despite the fact that it is still early for the January prognosis.
‘Ofgem pushing through with passing price cap adjustments on to customers quarterly rather than every six months wasn’t required,’ said Peter Smith, director of policy and campaigning at National Energy Action, ‘and sadly implies more big price hikes in January are probable.
‘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 Great Britain, particularly for the poorest households.
‘It’s disappointing that Ofgem has not listened to these concerns. They could have used their discretion to offset this avoidable outcome by starting the reforms in April when energy demand starts to fall.
‘This change also strengthens the growing calls for deeper price protection for the poorest households, something Ofgem can and must help support.’
Additionally, National Energy Action’s head of policy and public relations, Matt Copeland, stated: “Ofgem confirmed this morning that the price ceiling will update quarterly. It most likely suggests that it will rise in January. a week following Christmas.
‘Possibly reduces costs in the long term, but does the opposite of help *this* winter – in the middle of an energy crisis.’
The expense of supplier failures is something that has been added to all of our bills, according to Citizens Advice’s head of energy policy, Gillian Cooper. A quarterly price limitation should reduce the likelihood of any further suppliers going out of business, which is a positive thing. However, our bills are already quite expensive and are continuing to rise.
‘The Government was right to bring in financial support for people, but it may not be enough to keep many families afloat. It must be ready to act again before winter draws in.
‘Ofgem must make sure suppliers are helping customers who are struggling to pay. It should hold energy companies to account so people aren’t chased by debt collectors or pushed onto prepayment meters when they can’t keep up with bills.’
Harry Wallop, a consumer expert, tweeted that Ofgem had confirmed that the energy quota will alter every three months. to prevent businesses from failing, which would ultimately raise customers’ bills with additional expenditures.
‘But all those companies went bust last winter because Ofgem was asleep at the wheel when times were good.’