Energy bills for more than 22mn British households will change every three months rather than every six from October, under proposals to adapt the country’s energy price cap published on Monday.
Regulator Ofgem argued that quarterly, rather than twice-yearly, reviews would result in consumers seeing “the benefit much sooner” when wholesale gas and power prices start to drop from their record highs.
However, the change would also mean any further surges in wholesale prices would also be passed on to households much faster.
At present the price cap, introduced in 2019 to protect households that do not shop around for fixed-price deals, is revised twice a year, in April and October.
That meant households were protected from the worst of the wholesale market volatility at the end of 2021 and the start of this year as those price increases were only passed on in April, when energy usage started to fall. The cap dictates energy bills for more than 22mn households.
Ofgem hopes to bring in the changes from October, subject to consultation.
The regulator argued the changes would also help energy suppliers, which have long complained about the way the price cap is calculated. Several including Bulb, the UK group that had to be bailed out with £2.2bn of taxpayer money, said the price cap was among the reasons for its failure.
“The last year has shown that we need to make changes to the price cap so that suppliers are better able to manage risks in these unprecedented market conditions,” said Ofgem chief executive Jonathan Brearley.
The government said the setting of the price cap was a “matter for Ofgem” but added: “The price cap continues to insulate households from even higher global gas prices.”
