HOUSEHOLDS could face more pain this year as the energy regulator looks to review the price cap more frequently.
Ofgem today confirmed that the new energy price cap would rise to £1,917 from April 1.
1
The 54% increase will add £693 to the average energy bill.
Usually the energy price cap is reviewed twice a year – with changes coming into force in April and October.
But households could face more than two hikes a year under new measures.
Ofgem will tomorrow announce further measures to help the energy market.
And among these will be a measure that will enable Ofgem to review prices more frequently.
It said: “The further measures include enabling Ofgem to update the price cap more frequently than once every 6 months in exceptional circumstances to ensure that it still reflects the true cost of supplying energy.”
Most read in Money
Laura Suter, head of personal finance at AJ Bell, said: “This is particularly worrying as it means households will have even less certainty about what price they will be paying for energy.”
The move, which is set to be confirmed at 7am tomorrow (February 4), could heap more misery on families already facing a cost of living crisis.
Today the Bank of England doubled interest rates to 0.5%, which will add £700 to typical annual mortgage repayments.
Inflation has hit a 30-year high of 5.4%, adding £180 to the average grocery shop bill.
There are fears it could reach 7.5% later this year, driving prices up further.
? Read our Energy price cap live blog for the latest updates
Households are also facing increases to train fares, national insurance, and council tax adding hundreds to their annual outgoings.
Tashema Jackson of energyhelpline.com, said: “The past six months have seen extraordinary volatility in the wholesale energy market and the regulator’s hands have been tied by the price cap legislation, which only allows it to update the price of energy twice a year, resulting in one large increase rather than a gradual rise over a longer period of time.
“Tomorrow’s announcement could mean that we see more adjustments to the energy price cap in exceptional circumstances, which could be either an increase or a decrease depending on the circumstances in the wholesale market.”
Suter said the decision by Ofgem was an attempt to help suppliers, many of which are currently operating at a loss.
She said: “The effects of the price cap and soaring energy costs mean that since last summer 29 energy suppliers have gone out of business or into special administration, and Ofgem is attempting to mitigate some of this.”
Ofgem has said that the way it currently calculates the price cap didn’t account for the costs that energy firms had incurred while wholesale prices have risen.
Because the price cap is calculated based on the previous six months’ prices, if there is a surge in wholesale costs, these are not initially passed on to customers – meaning energy firms are effectively operating at a loss.
Emma Pinchbeck, chief executive of trade body Energy UK, has said many providers are currently losing £300 to £400 per customer as they are unable to pass on soaring wholesale prices.
Today, Chancellor Rishi Sunak announced a package of measures to try and help households cope with soaring energy bills.
He will offer a £200 refund on energy bills, which will have to be repaid over the next five years.
An estimated 80% of households will also get a £150 council tax rebate.
But critics have said the measures do not go far enough, as they only cover around half of the latest energy price cap hike.
The new measures would give the regulator more flexibility to step in and raise the price cap if needed.
It said five tests would be set out to ensure Ofgem only uses this option in exceptional circumstances.
We pay for your stories!
Do you have a story for The Sun Online Money team?
