The UK household energy price cap will be reviewed four times a year as part of a proposed initiative to give people more control over their gas and electricity costs.
As it prepares for further volatility across global markets, energy regulator Ofgem plans to introduce the new reviews in October and update the energy price cap again in January and every three months after that.
It proposed the move in the hope that it will allow customers to capture savings from a potential gas price drop more quickly, and keep under-pressure energy suppliers protected against being damaged by a cap.
But Jonathan Brearley, chief executive of the regulator, admitted the changes could result in families seeing their energy bills rise four times a year.
The regulator released a document proposing new reviews of the price cap for January and July, in addition to the existing reviews in April and October.
As the price cap is set using historical wholesale prices, creating a time lag between market prices changing, Ofgem said a more frequent price cap “would reflect the most up to date and accurate energy prices and mean when prices fall from the current record highs, customers would see the benefit much sooner”.
Brearly said it would also help energy suppliers better predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures, which he said have contributed to costs being pushed up for consumers.
“The last year has shown that we need to make changes to the price cap so that suppliers are better able to manage risks in these unprecedented market conditions,” he said.
In the absence of these changes, Ofgem claims fewer energy suppliers would remain in the market, meaning net zero investments would be unlikely.
For the average household, the energy price cap is currently at a record £1,971 per year but could rise as high as £2,900 a year, Scottish Power predicted last week.
Commenting on Ofgem’s announcement, Myron Jobson, senior personal finance analyst, interactive investor says: "Staying on top of energy bills is becoming a daily battle for many. The recent increase in the energy price cap, which has added almost £700 a year to the average household's bills, has pushed many finely crafted budgets to breaking point."
"Adjusting the cap more regularly in the current high and rising inflation environment means energy bills will go up more frequently, which could spell disaster for households already struggling to stay financially afloat. With the cost of seemingly everything else also on the up, more regular price rises will be a worry for many."