Ofgem consults on adjustments to the energy price cap

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Energy regulator Ofgem has launched five consultations on proposals that seek to ensure that the price cap reflects the costs, risks and uncertainties facing energy suppliers.

  1. Consultation on the potential impact of increased wholesale volatility on the default tariff cap.

This consultation considers whether the recent market volatility has caused the level of the price cap to materially depart from the efficient cost level allowed for in the price cap.

2. Consultation on the process for updating the Default Tariff Cap methodology and setting maximum charges.

This consultation sets out proposals to modify the licence to introduce an ability for Ofgem to amend the cap outside of our routine six-month cycle, where exceptional circumstances (which are rare and would have high impacts without urgent action) occur.

3. Consultation on the true-up process for COVID-19 costs.

Ofgem previously concluded that the COVID-19 pandemic had resulted in additional material costs, specifically debt-related costs for credit meter default tariff customers. This consultation sets out how Ofgem will determine the final additional debt-related costs as a result of COVID-19.

4. Consultation on reflecting End User Categories in the default tariff cap.

The proposed change will allow for a more appropriate reflection of efficient costs associated with prepayment meter customers from cap period eight onward.

5. Consultation on Energy Company Obligation scheme allowance methodology in the default tariff cap.

This consultation proposes a new input that will enable Ofgem to allow for the costs of the ECO4 scheme. It also includes a contingency given that the scheme is yet to be approved by Parliament.

 

Stakeholder responses to these consultations will inform the regulator’s decisions. Ofgem intends to have all decisions published by the beginning of February 2022 for all the documents, except the COVID-19 true-up, which is intended to be published by the beginning of August 2022.

Stakeholder views are invited on any aspect of these documents by 17th of December 2021.

More information about these consultations is available on the Ofgem website.