Energy price cap to be reset every three months amid market chaos
Household gas and electricity bills will be reset more frequently under plans by the energy regulator to help customers amid the cost-of-living crisis.
Ofgem says setting the energy price cap every three months rather than twice a year will help suppliers to manage their costs and help households benefit more quickly from any falling prices.
Around 30 household suppliers have collapsed since last August, faced with rising wholesale gas costs that they were unable to immediately pass on to consumers due to the price cap.
The latest reset on April 1 led to a 54pc increase pushing average annual energy bills to £1,971 - a key driver of Britain's tightening cost-of-living squeeze.
Jonathan Brearley, chief executive of Ofgem, said: “Today’s proposed change would mean the price cap is more reflective of current market prices and any price falls would be delivered more quickly to consumers.
"It would also help energy suppliers better predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures, which ultimately pushes up costs for consumers."
The price cap covers households on default standard variable tariffs, currently numbering about 23m, and is currently reset every six months, based on wholesale prices.
It is expected to rise again significantly when it is next reset in October, with Russia's war on Ukraine adding to the volatility in gas prices.
Gas prices have fallen in recent weeks in the UK due to a surge in imports and limited capacity to send these on to Europe.
However, the way suppliers buy energy ahead of time as well as ongoing volatility means this is unlikely to mean a fall in the October price cap.
Dan Norton, deputy director for the price cap at Ofgem, said: "We do expect it to be a further increase from the April cap level.
"I think there's still too much uncertainty to really pin down a particular number.
"There's even more uncertainty in terms of the January cap level; there's a long time to go before then, and a lot can still happen."
Despite the added uncertainty for consumers of having their bills changed every three months, Ofgem argues the move will ultimately save consumers money by making the market more resilient.
"These changes will reduce the risks associated with providing the default price cap tariff in volatile wholesale markets – which in turn reduces costs for customers in the short and longer-term," it said.