Huge overhaul to energy bills touted by Ofgem with price cap under threat
The energy price cap could be scrapped under proposals being discussed by the regulator.
Prices could also be capped at different levels depending on the time of day in another of the mooted plans.
Ofgem says changes are needed as households' energy habits are altering, such as with the use of electric vehicles and heat pumps, as well as solar panels.
Tim Jarvis, Ofgem's director general of retail and markets, said: "We recognise the systems we have in place may need to change.
"We're looking in detail at 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."
Options being discussed are:
- Having more than one price cap depending on the time of day.
- Scrapping the cap and replacing the cap with a ban on offering cheaper deals to new customers that aren't available to existing customers.
- Introducing different price caps for groups such as those on pre-payment meters or the vulnerable.
- Limiting how much profit energy firms can make from price-capped tariffs.
- Linking how much an energy firm can charge for its default tariff to the cheaper deals it offers. (The default tariff is usually the price cap).
A consultation will be carried out when Ofgem is ready, with its aim to ensure the market works for everyone.
The energy price cap sets a limit on how much energy companies can charge for a unit of gas or electricity.
Before the energy crisis, many companies offered cheaper fixed rate deals to tempt customers to switch energy provider. But when energy prices started to soar, suppliers withdrew all their fixed rate deals and put customers on the variable rate which was linked to the price cap.
Now energy prices are starting to come down, some deals are coming back onto the market.
The price cap will fall to £1,690 from April 1 2024, a drop of £238.
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