Ofgem Price Cap

Ofgem’s energy price cap is likely to change soon

In recent months the UK has been dealing with an energy market crisis that has caused higher energy bills for a big proportion of the population. In addition to that, many suppliers have been struggling and, since August, 14 have stopped trading.

To address these changes, Ofgem, energy suppliers, and consumer bodies arranged a special meeting where they discussed how the energy price caps are calculated.

Why is Ofgem getting involved?

Ofgem decided it was time to undertake steps to prevent even more suppliers going out of business. Now, increasing numbers of energy providers cannot cover rising supply costs. These costs, as well as the price of producing energy are expected to keep getting higher throughout winter. At the same time, during winter months, the demand for energy is higher as well as people need to turn the heating on more often than during summer or spring.

Taking these things into consideration, Ofgem has called a special meeting hoping to reduce the strain on suppliers and regulate them to promote more sustainable business models. In doing so Ofgem aimed to protect the short and long term interests of consumers.

What is the energy price cap?

The cap is a limit on the unit rate and standing charge that energy suppliers can charge for their standard variable – or ‘default’ – tariffs. The rate is set by Ofgem, the energy regulator, and is reviewed twice a year. A new cap rate of £1,277 was announced in August 2021’, Uswitch explains.

The cap aims to protect energy consumers from energy suppliers setting prices too high. Ofgem’s consultation with suppliers regarding adjustments to the energy price cap is expected to result in the energy price cap being higher. This way the financial strain suppliers are experiencing will be lowered. For now it is not expected that the price cap will be changed by the end of 2021.

How will my energy bills be affected?

For the time being you are being protected by Ofgem’s existing regulations and the current price cap. The meeting was only the first step in the process of re-evaluating the existing rules and measures to end the energy crisis.

Usually, the price cap is reviewed and adjusted in April every year. Now, however, many are pushing for its alteration to happen in February instead. That means that everything will stay the same at least until February 2022 and your energy bills are not likely to become way more expensive.

Which suppliers went bust because of the energy crisis?

Since January, the wholesale energy prices of gas went up by 250%. Not being able to deal with these costs and with the price of supplying energy to customers, numerous UK suppliers have closed their doors. These include:

• Hub Energy – they were the first to announce that they were going to cease operations. After they announced the decision, Ofgem appointed E.ON to take on the 6,000 domestic and 9,000 non-domestic customers.
• MoneyPlus Energy and PFP Energy – they went bust in the beginning of September, leaving 9 000 and 87 600 customers, respectively.
• Utility Point and People’s Energy – customers of People’s Energy were moved to British Gas, while Utility Point’s customers were being switched to EDF.
• Avro energy and Green – the two providers accounted for 3% of the energy supply in the UK. Avro Energy had more than 580 000 customers and Green supplied energy to 255 000 domestic customers. Octopus Energy was appointed to take over the customers of Avro, while Shell Energy took over customers of Green.
• Igloo Energy, ENSTROGA and Symbio Energy – the latest suppliers to go bust on the 29th of September. As they were small suppliers, together, they accounted for less than 1% of the total energy supply in the UK. E.ON was appointed to take on their customers.
• Colorado Energy, Daligas, GOTO Energy and Pure Planet went bust too and Shell Energy was appointed to supply their customers.
• Bluegreen is the latest supplier to go bust at the beginning of November.

Both large and small suppliers have been affected by the energy crisis but, of course, the smallest ones have been hit the hardest.

As an energy customer, however, you do not have to worry because Ofgem is there to protect you.

If your gas supplier went bust and you are looking for a new one, contact Niccolo Gas. We offer a wide range of gas products at competitive prices.