Ofgem could introduce quarterly price cap updates

The energy regulator believes a more frequent price cap would reflect the most up-to-date and accurate energy prices, meaning when prices fall from the current record highs, customers would see the benefit much sooner.  

It also says the move will help energy suppliers more accurately predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures which ultimately push up costs for consumers. 

Commenting on the news, Ofgem chief executive Jonathan Brearley said: “Our top priority is to protect consumers by ensuring a fair and resilient energy market that works for everyone. Our retail reforms will ensure that consumers are paying a fair price for their energy while ensuring resilience across the sector.” 

Alongside making changes to the energy price cap every three months instead of every six months, Ofgem is proposing making a small reduction in the amount of notice suppliers get on the new level of the cap. 

It will also update the wholesale allowance to ensure that suppliers can recover backwardation costs -  when the current price of an underlying asset is higher than prices trading in the futures market - in a reasonable period of time. 

The regulator believes the changes being proposed would enable suppliers to recover their costs and deliver better outcomes for consumers.   

This statutory consultation would allow Ofgem to bring in the changes from October and support the sector through a potentially challenging winter.