The chief executive of Ofgem has proposed changes to review the energy price cap four times a year instead of two. This would mean that bills could go up quicker, but that they could also fall more rapidly, says Jonathan Brearley.
The energy regulator said that it might insert the additional reviews in January and July. It would help pass on savings from a potential fall in gas prices to customers more rapidly, Ofgem said, and also protect under-pressure energy suppliers from being damaged by the cap.
The price cap works by limiting how much the average home pays for power every year, if they pay by direct debit on a variable rate tariff. The price cap is currently reviewed once every six months and in March increased by 52 percent, meaning the average household is now forking out nearly £700 more on their bills annually.
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Talking about the proposed increased price cap reviews on Sky News, Mr Brearley said: "Yes, the price would go up more quickly as prices go up, but equally importantly as those prices come down, then the price cap comes back down again."
He added: "Remember that the total cost you pay over the year would be absolutely the same, because that reflects only the cost of the energy that we buy."
But Mr Brearley also admitted the 'difficult news' that bills are 'likely' to go up again in October, due to the 'sustained increase in gas prices' fuelled by the Russian invasion of Ukraine.
He added: "Throughout this gas crisis, we have been making sure that customers are protected and they pay a fair price for their energy. Now, if you look forward, and you think about the future of that gas price, it’s incredibly hard to predict.
"Clearly, since Russia invaded Ukraine, the international prices have gone up again. As I’ve said before, we do expect further price rises. But as soon as those costs come down, we will make sure that prices come down."
Meanwhile, a statement issued by Ofgem said: "A more frequent price cap would reflect the most up to date and accurate energy prices and mean when prices fall from the current record highs, customers would see the benefit much sooner.
"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 which ultimately push up costs for consumers."
