Energy price cap to be reviewed in response to unprecedented rise

Ofgem, UK energy watchdog, said it will review how the price cap on gas and electricity bills is calculated in light of the collapsing energy firms.

This comes after an “unprecedented” rise in wholesale energy prices, which suppliers have been unable to pass onto consumers.

Ofgem will examine if the price cap reflects the risks facing companies, and will “consult on the price cap methodology to ensure it appropriately reflects the costs, risks and uncertainties facing suppliers”.

The price is the maximum amount per unit that a supplier can charge households on a standard tariff and can be reviewed twice a year by Ofgem.

Over the past couple of months, more than two million households have seen their energy suppliers go bust because of the rise in gas prices; this has sparked suppliers to help households find new suppliers.

Ofgem currently calculates the cap by looking at wholesale gas prices, energy suppliers’ network costs and costs of government policies such as renewable power subsidies.

It will launch the consultation in November. A decision on any changes will be published in February, when the new price cap will be announced before it is implemented in April.