Under new plans, energy bills may rise three times a year. These new plans also include stricter health screenings for businesses.

  • The wholesale gas price has risen by approximately 500% in less than 12 month.
  • Over four million homes were affected by 26 service providers that went bankrupt in the summer.
  • Customer facing multi-billion-pound bills in the wake of crisis pushed up their costs
  • Under plans to change the price cap, energy bills may rise every three months.

Families could face energy bill increases every three months under plans to overhaul the price cap. 

The Regulator Ofgem pledged that it would introduce new financial security checks beginning in January, to ensure power company failure prevention. 

Under the watchdog’s proposals, suppliers which do not pass its ‘stress tests’ could be barred from taking on new customers. 

After wholesale gas prices rose by 500% in 12 months, the energy market plunged into chaos. 26 providers collapsed in the last 12 months, impacting more than 4 million homes. 

Customers are facing an estimated multi-billion-pound bill due to the financial crisis. The cost of this will only increase. This is because firms that take over customers of bust suppliers can claim back any losses made from an Ofgem fund that is financed by all customers’ bills. 

The energy market was plunged into chaos after wholesale gas prices soared by 500 per cent in less than 12 months.

After the wholesale gas price explosion of 500% within 12 months, chaos erupted in the energy markets.

This cap covers more than 15million households. It limits what firms can charge their customers for standard variable agreements. With no fixed-rate deals available, many more households could move to standard tariffs in the coming months. 

Until now, Ofgem has reviewed the cap, currently £1,277 a year for the average household, twice a year. Yesterday, however, the regulator cautioned that suppliers may fail if they do not make changes to the way the system operates. This is because they cannot pass the true costs of electricity to customers. 

One proposal was to review the cap every three months. Ofgem would have the authority to set it back in exceptional circumstances such as this crisis. 

A regulator recommended that householders be tied into 6-month agreements, which would require them to pay a penalty to cancel. However, any price caps will remain in effect until October next year. 

Joe Malinowski, of comparison site The Energy Shop, said: ‘More frequent adjustments to the price cap will provide a lifeline to energy suppliers who may collapse if they cannot pass on their losses.’ 

Under Ofgem’s plans to strengthen the market, energy bosses may have to meet stricter ‘fit and proper’ person requirements to ensure they are capable of running a power firm. 

Ofgem may limit the number of customers companies can accept until they are able to handle more. Ofgem added that it would also draw up ‘improvement plans’ for suppliers it did not deem secure. 

Until now, Ofgem has reviewed the cap, currently £1,277 a year for the average household, twice a year. But the regulator warned yesterday that if it did not change how the system works there was a risk more suppliers could fail

Until now, Ofgem has reviewed the cap, currently £1,277 a year for the average household, twice a year. The regulator warned that the system’s current structure could be reworked and more suppliers could go under.

Jonathan Brearley, chief executive of Ofgem, said: ‘I’m setting out clear action so that we have robust stress testing for suppliers so they can’t pass inappropriate risk to consumers.’ 

Experts warn that these proposals may be too modest and too late. 

Richard Neudegg, head of regulation at comparison site Uswitch, said: ‘Introducing financial stress testing after 26 energy providers have exited the market feels like the very definition of shutting the stable door after the horses have bolted. 

‘While necessary for the future, these proposals are clearly too late to help the current crisis.’ 

Trade body Energy UK said the industry had ‘long been calling’ for ‘a more sustainable regulatory and policy environment’.