Plans to reset energy price cap more often will hit households

HOUSEHOLDS would be hit with more frequent increases to energy bills under plans to help suppliers cope with wholesale price shocks.

Ofgem, the energy regulator, wants to be able to reset the price cap on energy bills more often, as soaring gas and electricity prices push suppliers out of business.

The price cap allows energy suppliers to pass wholesale costs on to customers but is currently only reset every six months, meaning many suppliers are struggling with the rapid global rise in costs in the past few months.

More than 20 suppliers, serving 2m customers, have collapsed since the start of September.

Ofgem is seeking powers to be able to adjust the cap outside of the normal sixmonth cycle. “In exceptional circumstances, waiting until the next cap periods may lead to negative consequences and, consequently, risks to either suppliers or customers,” it said in a consultation published yesterday.

No change to the level of the price cap is expected before its next scheduled reset in April, when experts predict it could rise by at least £400, taking the average dual fuel household bill to £1,660.

A global gas supply crunch has triggered a six-fold rise in natural gas prices since last summer, while electricity has traded at about four times higher than normal due to the role of gas in generating electricity.

More suppliers are expected to go bust before April, with gas prices climbing this week amid further concerns over supply to Europe from Russia.

Scottish Power, one of the largest suppliers, has warned the market could shrink to five or six companies, from about 50 at the start of the year.

Gillian Cooper, head of energy policy at Citizens Advice, said: “Any increase to the price cap will be unwelcome news for households.”