Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

UK's energy regulator proposes quarterly price cap reviews

Commodities May 16, 2022 13:06
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: The sun rises behind electricity pylons near Chester, northern England October 24, 2011. REUTERS/Phil Noble

By Susanna Twidale and Kate Holton

LONDON (Reuters) -Britain's energy regulator Ofgem said on Monday it plans to review a price cap on consumer bills every quarter rather than twice a year to reflect the volatile price swings in the market and help prevent more suppliers from going bust.

More than 25 suppliers collapsed last year squeezed by record high wholesale energy prices and with the cap preventing them from passing on costs to customers.

Ofgem said moving to a quarterly review would mean the cap is more reflective of current market prices and any price falls would be delivered more quickly.

"Should prices start cooling off again those changes will be passed back through to consumers as soon as possible," Dan Norton, Ofgem price cap deputy director said in a press briefing.

The price cap was raised 54% in April to an average 1,971 pounds a year to reflect soaring global gas prices last year following the reopening of the global economy from COVID-19 lockdowns.

The cost of finding new suppliers for customers whose companies had gone bust also accounted for around 10% of the April price cap increase or 68 pounds a year.

"This change would also help energy suppliers more accurately predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures," Ofgem said in a statement.

British wholesale gas prices hit fresh record highs following Russia's invasion of Ukraine and have remained elevated due to fears over disruption to Russian gas supplies to Europe.

Analysts expect the cap to rise again in October, by more than 30% to an average of 2,595 pounds a year latest forecasts from Cornwall Insights showed.

Ofgem will now launch a new consultation on the plan with the industry. The price cap will change in October and if a quarterly review is adopted it would be introduced for January.

Ofgem's Norton said it was too early to predict whether another price cap rise was likely in January.

The regulator also proposed increasing its "stabilisation charge" - the amount a new supplier must pay to an old supplier when a customer switches providers to compensate for any losses it may make on its power hedges if wholesale prices fall after the customer has left.

Ofgem said this would help prevent firms from going bust but consumer champion Martin Lewis said on Twitter (NYSE:TWTR) the change would be a “disaster” for customers, "killing hopes of firms launching cheaper deals.”

UK's energy regulator proposes quarterly price cap reviews

Related Articles

Gold Treads Water at Mid-$1,800 as All Eyes on Fed 
Gold Treads Water at Mid-$1,800 as All Eyes on Fed  By - Jun 24, 2022

By Barani Krishnan -- Bulls in gold logged a second weekly loss as the yellow metal treaded water at mid-$1,800 levels amid a keen watch on the Federal Reserve’s next...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Ans Lau
Ans Lau May 16, 2022 10:14
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Why don’t the government suggest subsidy to the energy users rather than changing the cap to protect the energy companies?
Barrie Foster
Barrie Foster May 16, 2022 10:08
Saved. See Saved Items.
This comment has already been saved in your Saved Items
'Any price falls would be delivered more quickly to consumers'. lol
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email