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With the UK’s cost of living crisis worsening, energy regulator Ofgem is proposing to adjust the price cap on bills twice as frequently, to cope with market volatility.
A day after UK households learned that average bills would rise by almost £700, Ofgem launched a consultation on a proposal to move from half-yearly to quarterly price cap updates.
Currently, the cap on what suppliers can charge only increases every six months.
Jonathan Brearley, CEO of Ofgem, told Radio 4’s Today programme.
We have witnessed an extraordinary event in the energy market in recent months. Something that is a 30 year event.
We have seen much higher volatility and price changes than expected and historical.
This volatility has led to a wave of corporate collapses since last summer as they could not pass on rising wholesale electricity and gas prices to consumers.
After raising the price cap by 54% on Thursday, Brearley is now looking to the future, warning that the UK’s regulatory package needs to change.
The bad news for all of us is that this volatile market could be with us for a while.
Adjusting the price cap more frequently means that when the price goes up, the cap goes up, meaning that households would be affected sooner by changes in the wholesale market.
But when prices come back down, the cap will also come down, Brearley argues.
And in the long term, the real way for the country to escape this volatility is to diversify its energy sources and push harder to achieve net zero.
The energy price crisis prompted Chancellor Rishi Sunak to announce yesterday that 28 million electricity customers will have their bills canceled by £200 in October.
But the money is to be repaid in annual installments of £40 over the next five years, and has been criticized as a ‘buy now, pay later’ scheme.
Council payers in England in Bands A-D will get a £150 rebate on their bills in April, which won’t have to be repaid, while separate money has been earmarked for devolved governments in Scotland, the Country of Wales and Northern Ireland.
Yesterday the Bank of England warned that UK households faced the worst pressure on their disposable income for at least 30 years, with real after-tax earned income set to fall by 2% this year.
With inflation hitting 7.5%, a tax hike in April, slowing economic growth and rising unemployment, the economic outlook is darkening…with Britain’s interest rate hike on Thursday adding pressure on the borrowers.
Also coming today
The latest US jobs report is expected to show a sharp slowdown in hiring at US companies last month, due to the surge in Omicron business and a corporate slowdown. Economists predict that employment in January slowed or even turned negative.
Adam Cole of RBC Capital city Markets Explain :
The median expectation for the overall payroll change is +150K, but the actual expectation is almost certainly much lower than that.
After a very weak private payrolls report this week and comments from several Federal Reserve officials that the jobs report may be an outlier, market expectations may now be centered on an overall negative number, Cole said.
European stock markets are set to open higher, after Amazon beat profit expectations last night and announced it would raise the price of its Prime service in the US by passing on higher shipping and labor costs students.
Amazon shares surged in after-hours trading shortly after Facebook parent company Meta posted the biggest single-day loss in history for a US company, with more than $230 billion wiped from its value after disappointing results
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