Ofgem has announced today that the energy price cap will be updated quarterly instead of every six months as millions are facing a “very challenging winter ahead.”
The regulator said this will go “some way to provide the stability needed in the energy market,” adding, “It is not in anyone’s interests for more suppliers to fail and exit the market.”
The war in the Ukraine has led to a volatile global energy market last winter which lasted “much longer, with much higher prices for both gas and electricity than ever before.”
However the GMB union has warned that this move will “create unnecessary uncertainty for households” as struggling households will “likely see their bills rise even faster.”
Andy Prendergast, GMB National Secretary warned, “This change will create unnecessary uncertainty for households.
“Although in theory this allows for bills to fall more quickly as a result of changes in the energy market, it also allows bills to be raised at a faster rate.
“Prices are forecast to go up in the medium term, meaning that struggling households are likely to see bills rise even faster.
“As prices rise, the Government must shoulder responsibility for its failure to tackle the difficult questions over gas storage and investment in new nuclear.
“Ministers and OFGEM should be providing customers with support and certainty – instead, this announcement will lead to real worry that those just about managing will be tipped over the edge.”
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National Energy Action director of policy and advocacy Peter Smith said, “Ofgem moving ahead now with passing price cap changes on to households quarterly rather than every six months wasn’t 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 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.”
Ofgem chief executive Jonathan Brearley said, “I know this situation is deeply worrying for many people. As a result of Russia’s actions, the volatility in the 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.”
Business, Energy and Industrial Strategy Committee chairman Darren Jones said, “Whilst the change announced by Ofgem today will prevent more energy suppliers going bust, and the cost of failures being added to our bills, it also means customers will see their bills going up more frequently than before.
“These increases won’t be as big as before but they’ll be increases nonetheless.
“When the price of energy starts to come down, customers will see their energy bills reduce more quickly, but I don’t expect to see this happening until the end of 2024 or 2025.
“That’s why my Committee has asked the Government to look at introducing a social tariff, as a more effective method of price regulation to help low income households.”