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Ofgem has launched a discussion on the energy price cap, floating options such as a cap based on things such as vulnerability and when energy is used.
The watchdog said it will examine how energy regulation must change “to ensure customers are protected, they continue to pay a fair price for their energy, and they get to realise all the benefits of net zero”.
Energy bills shot up after major gas supplier Russia launched a full-scale invasion of Ukraine in February 2022 – Ofgem’s energy price cap in the winter of 2021/22 was £1,216 but by January 2023 it had climbed to more than £4,000.
The cap, based on the annual energy cost for an average usage medium-sized household paying by direct debit has been under the spotlight since then, with critics asking if it has become a barrier to competition.
Some of the options in Ofgem’s discussion paper include a price cap that looks at the time of day energy is used, a targeted cap based on factors such as vulnerability, and protections such as capping the margin suppliers can make.
Tim Jarvis, director general of retail and markets at Ofgem, said: “We’re looking in detail at the elements of the price cap that have worked well and the challenges we’ve identified in recent years, while also considering how a wide range of future consumers will use and pay for energy to make sure we develop the right measures that will protect and benefit consumers across the board.”
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