Ofgem considers new price cap based on time energy is used to reduce household bills

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Ofgem’s energy price cap could be replaced with a new system measuring the time of day energy is used and a customer’s “vulnerability”, it’s been announced.

The watchdog has launched a consultation on updating the price cap, which is the maximum amount energy suppliers can charge for each unit of energy for households on a standard variable tariff.

Ideas put forward include a “time-of-use” rate to introducing a targeted cap that could be based on factors such as vulnerability, and protections such as capping the margin suppliers can make.

The body said the cap, introduced in 2019, needed to keep up with the changes in the energy retail market with increasing numbers of customers now using electric vehicles, heat pumps and solar panels.

Ofgem’s director general of retail and markets, Tim Jarvis, said: “While the price cap played an important role in protecting consumers from the loyalty penalty that existed before its introduction, the energy market is changing as we move to net zero, and we recognise the systems we have in place may need to change too.

“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.”

This is a breaking news story – more to follow