Ofgem launches consultation on new price cap

Energy industry regulator Ofgem is considering a range of options for how a price cap may look in future as energy-usage patterns change in the move to net zero.

The watchdog said that combined with a short-term ban on acquisition-only tariffs, whereby suppliers offer deals exclusively to new customers, the current price cap had served to mitigate the “loyalty penalty,” which often sees consumers need to actively seek out deals to avoid paying more. Nevertheless, with innovations like solar panels and electric vehicles likely to affect consumption patterns in future, Ofgem believes the current price cap mechanism will be difficult to maintain.

The director general for markets and retail at Ofgem, Tim Jarvis, said the regulator was taking a detailed examination of:

“…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.”

Among the proposals are a more dynamic cap that would vary unit costs based on the time of day. Ofgem also suggest abolishing the cap altogether and replacing it a permanent ban on acquisition-only tariffs or a limit on the margins that energy suppliers can make.

While it is right for Ofgem to prepare for the future energy market, gas central heating remains a popular option for today’s homes. Xgas can dispatch heating engineers to Chester and other nearby locations, so call for a quote.