Now the energy price cap will be reviewed every three months

THE energy price cap is to be re- evaluated every three months in a move that threatens ‘ misery’ for millions of households this winter.

The decision by the industry watchdog Ofgem will protect energy retailers by allowing them to pass on spikes in wholesale energy prices – caused by Russia’s invasion of Ukraine – quickly to customers.

However, charity bosses say this help for the industry will be at the expense of millions who face punishing increases in bills.

Historically, the price cap changed twice a year, in April and October; however, Ofgem has announced it will now change four times – January, April, July and October.

This year, the move will effectively allow energy companies to push up the typical annual bill from £1,971 to around £3,244 in October and then £3,363 in January – with some forecasters predicting it will be even higher. This threatens disaster for those suffering the biggest cost of living squeeze since the 1950s with suggestions that more than 8million could be plunged into fuel poverty.

This means they will struggle to keep the heating and lights on while covering other essentials such as food.

Peter Smith, at National Energy Action (NEA), said the timing of the change is particularly bad for customers.

‘Ofgem passing price cap changes on to households quarterly wasn’t necessary and means further significant price increases in January are inevitable,’ he said

‘Average annual bills are already predicted to increase by £1,200 a year – 177 per cent since last October. Now, householders can expect further hikes just after Christmas, in the middle of heating season when energy costs are typically at their highest.

‘January is also usually a time of increased mental health problems and further hikes in bills will sadly lead to increased misery and huge anxiety, particularly for the poorest.

‘It’s disappointing that Ofgem has not listened to these concerns. They could have used their discretion by starting the reforms in April when energy demand starts to fall.’

Ofgem said that allowing energy firms to change the price cap every three months

means they can better cope with price spikes and are less likely to go bust.

It added that this protects consumers from having to pick up the costs every time an energy firm fails. It also argued that any falls in wholesale prices will also be passed on more quickly.

ofgem chief executive, Jonathan Brearley, said: ‘As a result of russia’s actions, the volatility in the energy markets we experienced last winter has lasted much longer, with higher prices than ever.

‘Today’s changes ensure the price cap does its job, making sure customers only pay the real cost of their energy, but also, that it can adapt to the volatile market.’

Gillian Cooper, at Citizens Advice, said: ‘ofgem must make sure suppliers are helping customers struggling to pay.’

Investec’s Martin Young predicted the energy price cap will reach £3,523 in october and £4,210 in January. Mr Young said: ‘The pressure on households will intensify, and calls for support get louder.’

Which? director of policy and advocacy, rocio Concha, said: ‘The Government and energy companies must work together to ensure targeted support.’