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Ofgem to continue announcing price cap despite Government bills guarantee

·2-min read

Energy regulator Ofgem has said it will continue to announce the cap on household energy prices, despite the Government saying it would guarantee lower bills for customers.

Ofgem said that it plans to still make the announcements every three months, as it continues to regulate how much energy suppliers can charge for their services.

Suppliers will then submit part of their regulated bill to each household, and the remainder to the Government.

“The price cap still has a role in limiting profits in domestic retail and setting a maximum level suppliers can charge whether that level is subsidised or not,” the regulator said following a query by the PA news agency.

It added that it will continue to announce the price cap over the next two years.

On Thursday Prime Minister Liz Truss announced that the Government would guarantee that the average household will pay no more than £2,500 in its energy bills.

However, the guarantee is a maximum price per unit of gas and electricity, so households that consume more than the average will see their bills higher than that.

ScottishPower chief executive Keith Anderson told PA: “This whole scheme is being introduced on the basis that the price cap remains and the methodology doesn’t change

“The price cap becomes the reference price as to what we charge.

“So the £2,500 that was announced gets converted into a unit cost and everyone will get the bill based on their usage.

“I then put a submission into the central system that takes that usage and the differential between the £2,500 unit cost, and the cap at £3,500, and I get a cheque back for that differential.”

He said that suppliers would continue buying and hedging energy in line with the way the price cap works.

In effect the price cap then becomes a cap which limits how much the Government will need to pay, rather than the amount that households must pay.