Fuel shortage activists on Thursday criticized a decision to pass wholesale gas and electricity price increases to British households faster, after Ofgem confirmed that the energy price cap would be changed every three months instead of twice a year.
The energy regulator insisted changes were needed to prevent another widespread crisis in the retail energy sector after more than 30 suppliers collapsed since January 2021 amid soaring wholesale prices. Consumers were paying to save failed supplier customers with their own energy bills.
But the decision has deeply angered fuel poverty activists, who argue that the current system – where the cap is changed only twice a year on April 1 and October 1 – protects households from the worst wholesale price hikes during the critical winter period when gas is on. Usage rises as consumers ignite their heating.
The regulator, which has come under fire for allowing too many poorly capitalized companies to enter the market in recent years, has been accused of siding with energy groups rather than consumers.
Ofgem on Thursday also confirmed other changes to its price cap methodology – which dictates the bills of 24 million households – which it said would add around £60 to the average bill between October and December. It included an amendment to ensure that companies could recover the full costs of purchasing power for the upcoming winter at very high prices.
Simon Francis, coordinator of the End Fuel Poverty Coalition, called the move to quarterly cap changes “simply inhumane” and claimed it would force more people into fuel poverty in the middle of winter.
Caroline Abrahams, director of philanthropy at Age UK, called the decision a “hammer blow” that “poses a significant threat to the health and well-being of older vulnerable families across Britain”.
Analysts have warned that the price ceiling, which imposes a cap on the price suppliers can charge per unit of energy and limits their profit margins, could rise by 70 per cent in October to nearly £3,360 a year per household on average, before reaching Over £3,600. in january.
Ofgem will confirm the October price changes on August 26, but energy companies and consumer groups have already called on the government to provide more support for cash-strapped families.
Jonathan Brierley, CEO of Ofgem, acknowledged that the situation was “extremely worrying for many people” but insisted that the changes “ensure that the price cap does its job, while making sure that customers not only pay the true cost of their energy, but also can adjust to.” The current volatile market.
The regulator insisted that the current twice-yearly system “simply delays the inevitable and means greater.” [price] It changes twice a year instead of small changes four times a year.” She stressed that the changes would also result in lower wholesale prices being passed on to households faster.
The price cap does not cover businesses and they tend to negotiate fixed-term contracts with suppliers. But analysts warned that many companies’ bills could increase fivefold from October, when many commercial energy contracts expire.
The Department for Business, Energy and Industrial Strategy said it recognized “the pressure people are facing due to rising costs” and was already providing assistance, including a £400 discount on energy bills for all homes this winter.
Additional reporting by Jasmine Cameron Chilichi in London