One of Britain’s largest energy suppliers Ovo has joined calls for a change in how consumer bills are priced.
Given highly volatile wholesale prices since 2021 and the subsequent failure of 30 suppliers as a result, Ovo boss Raman Bhatia told City A.M. Ofgem’s price cap needs reforming.
“We support the principle of price protection in general but we must accept that the energy market of today is vastly different from what it was pre-energy crisis,” he said.
“In this new era of extreme volatility, we need a social tariff for households who need most support and redesign the price cap radically to ensure it is fit for the rest of the market.”
Ofgem boss Jonathan Brearley last week called on the government to rethink the system, despite his regulatory body being responsible for determining the cap’s prices.
Though the price cap aims to put a ceiling on what suppliers charge per unit of gas and electricity, high wholesale prices have seen it effectively determine what is charged across the entire sector over the past year.
Given a clause in the cap allowed the likes of British Gas and Eon to score huge profits by hiking bills over the first half of this year, both ministers and Ofgem have faced scrutiny.
Some still back the cap though, including Octopus Energy chief executive Greg Jackson, who in June dubbed it “the single biggest driver of energy companies putting effort into efficiency rather than just passing bloated costs on to consumers”.
“Because energy prices are so opaque, some form of price protection is critically important,” he added.
Ofgem is due to update on the price cap from October onwards next Friday, with standard variable tariff customers currently charged 30p and 8p per kilowatt hour for electricity and gas respectively.