Ofgem energy price cap to be updated every three months

The change comes as customers are set to face a “very challenging winter ahead”.

The regulator said the change would go “some way to provide the stability needed in the energy market”, adding: “It is not in anyone’s interests for more suppliers to fail and exit the market.”

It said Russia’s actions in Ukraine had led to volatility in the global energy market experienced last winter lasting “much longer, with much higher prices for both gas and electricity than ever before”.

As expected, Ofgem warned that as a result of the market conditions, the price cap would have to increase later this month to reflect increased costs.

However, it said the changes would mean that any fall in wholesale prices would be passed on in full to customers and more quickly with the quarterly price cap.

Ofgem chief executive Jonathan Brearley said: “I know this situation is deeply worrying for many people. As a result of Russia’s actions, the volatility in the energy markets we experienced last winter has lasted much longer, with much higher prices than ever before. And that means the cost of supplying electricity and gas to homes has increased considerably.

“The trade-offs we need to make on behalf of consumers are extremely difficult and there are simply no easy answers right now. Today’s changes ensure the price cap does its job, making sure customers are only paying the real cost of their energy, but also, that it can adapt to the current volatile market.

“We will keep working closely with the Government, consumer groups and with energy companies on what further support can be provided to help with these higher prices.”

Changes to the price cap come as household energy bills are likely to remain at more than two-and-a-half times their pre-crisis levels until at least 2024, according to latest predictions.

Cornwall Insight, one of the country’s most respected energy consultancies, said bills will hit a staggering £3,359 per year from October for the average household, and not fall below that level until at least the end of next year.

The price cap on energy bills, which regulates what 24 million British households pay, will hit £3,616 from January and rise further to £3,729 from April, it said.

The latest forecasts come after the Kremlin further strangled the flow of gas to Europe.

While the UK gets very little of its gas directly from Russia, the price paid here is determined by what happens across the continent.

National Energy Action director of policy and advocacy Peter Smith said: “Ofgem moving ahead now with passing price cap changes on to households quarterly rather than every six months wasn’t necessary and unfortunately means further significant price increases in January are inevitable.

“Average annual bills are already predicted to increase by £1,200 a year – a 177% increase 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.

“This change also strengthens the growing calls for deeper price protection for the poorest households, something Ofgem can and must help support.”