Government discussing price cap with Ofgem - minister
The government is talking to Ofgem about possible changes to the energy price cap, a junior minister has said.
Paul Scully, the small business minister, told Sky News that the government has had "lots of conversations…with companies themselves, with Ofgem, in reviewing the price cap. We clearly want to protect customers."
Gas and electricity bills may not exceed the price cap, which is reviewed twice a year and set by the regulator. In August, Ofgem announced it would go up by 12% to £1,277 for a household using an average amount of energy, with the changes coming into effect from October.
The next official review is in April.
Fears are growing, however, that companies will still be at risk of collapse despite the rise. According to figures calculated by consultants EnAppSys for the Financial Times, the average annual bill would need to rise to £1,834 if households are to cover the full costs of buying supplies now for the next 12 months.
On Thursday, Avro Energy and Green Supplier became the latest small providers to cease trading. Utility Point and People’s Energy collapsed earlier this month.
Wholesale gas prices have soared by around 250% this year, fuelled by a variety of factors, including less wind output, lower than normal stores, and lower supplies from Russia, Europe’s largest supplier. At the same time, demand has surged as economies emerge from the pandemic. Unprecedented weather around the world has further heightened demand.
Larger suppliers hedge against price fluctuations but smaller companies are either unable or unwilling to do so. Such large hikes in wholesale price are also unprecedented, with Ofgem chief executive Jonathan Brearley telling parliament: "It really is something that we don’t think we’ve before at this pace."