The UK energy regulator Ofgem caused controversy this week by announcing that it will be reviewing its price cap quarterly instead of every six months – allowing them to ‘adjust more quickly to global volatility’. In the short term this means more regular price hikes with analysts predicting an increase of £3,615 per year from January 2023 onwards. Ofgem Chief Executive, Jonathan Brearley, claims that the move is necessary to prevent the failure of more energy companies.
According to a report by the NAO the failure of 29 energy suppliers since July 2021 has already cost £2.7bn (or £94 per customer) through the Supplier of Last Resort (SOLR) scheme. As the cost of wholesale oil rose, many of the smaller companies that had offered cheap fixed rate deals to customers when oil prices were relatively cheap, were unable to continue operating at these rates when input costs started to exceed revenues.
Brierley claims that higher energy prices in the UK are still being driven by rising prices on the global wholesale market. But wholesale oil prices have actually fallen by over 20% from the previous high of $140 per barrel and are now sitting at around $110 per barrel. Despite the fall in wholesale oil prices, the cost of fuel at the pump has continued…
