LONDON, UK: The energy regulator Ofgem has announced a new price cap level for the period of April to June 2023. The new cap will be set at £3,280 for a dual fuel household paying by direct debit based on typical consumption. This is a reduction of almost £1,000 from the current level, of £4,279 which reflects recent falls in wholesale energy prices.
In addition to the new price cap level, Ofgem has also announced a package of decisions and consultation documents. These include:
- A call for input on its review of the operating cost allowances in the cap, as indicated in the programme of work. This includes the core allowance, smart meter allowance and payment method cost differentials amongst other elements. Ofgem is seeking responses by 23 June 2023.
- A decision on removing the cap end date from the supplier licence conditions. This change implements a legislative change made by Government through the Energy Prices Act 2022, to remove the 2023 end date for the cap. Ofgem has also published a number of models where dates have been extended to reflect the removal of the cap end date.
- A statutory consultation on EBIT where Ofgem sets out its minded-to position on a revised EBIT allowance for cap period 11a onward. Ofgem anticipates to see indicative increases of the allowance of around £10 in period 11a. Beyond that, Ofgem has made changes to the way the allowance scales with the overall price cap level, which means consumers are better protected in the event of a price spike in the future. Ofgem believes that the revised EBIT allowance would contribute to a more financially resilient and sector, alongside attracting the investment needed to improve services provided to consumers.
Ofgem’s Chief Executive, Jonathan Brearley, said: “Today’s announcement is a significant step towards protecting consumers from the high energy prices we’ve seen in recent months. The new price cap will be set at £3,280, which is a reduction of almost £1,000 from the current level. This will provide much-needed relief to households across the country.
“We are also taking steps to make the energy market more resilient and attract the investment needed to improve services for consumers. We are consulting on a revised EBIT allowance, which would better protect consumers in the event of a price spike in the future. We are also removing the cap end date from the supplier licence conditions, which will allow suppliers to plan for the long term.
“I know that these are challenging times for many people, and I want to reassure them that we are doing everything we can to help. We will continue to monitor the situation closely and take further action where necessary.”