Dermot Nolan has said there is no “perfect” minimum period for reviewing the proposed energy price cap.
The government’s price cap bill states that the level of the cap on standard variable and other default tariffs should be reviewed at least every six months by Ofgem.
The regulator will decide, during the upcoming process of designing the cap, whether that minimum period should be shorter.
Presenting evidence during the committee stage of the bill’s passage through parliament, which took place on Tuesday (13 March), Ofgem’s chief executive said the decision on the review period was “not straightforward” and there was no “perfect number”.
He said a three-month review would be “vulnerable to spikes and changes in prices”.
But Nolan said the downside of sticking to the government’s proposed minimum period was that consumers could be saddled with paying over the odds for months if wholesale costs plunged soon after the cap’s level had been fixed.
Rob Salter-Church, acting senior partner for consumers and competition at Ofgem, told the committee the delivery of the price cap would be the regulator’s “absolute number one priority”.
“We are confident that we have a good, robust process and we will get through it as quickly as we can.”
Nolan said he would take personal responsibility for hitting the five-month target the regulator has set for implementing the price cap legislation if the government succeeds in securing Royal Assent in the summer.
This would enable the cap to be introduced in time for when customers receive their fuel bills this winter.
Outlining the timetable for the cap design process, Salter-Church said Ofgem would kick off by issuing a statutory two-month consultation.
The final draft of the cap formula would then be subject to a 56-day notice period following its publication.
Nolan said he would have told ministers if he believed that the timescale for implementing the cap was too tight.
“We are servants of parliament, and we will implement it as quickly and as effectively as possible.”
Salter-Church also rejected a proposal, pushed by Labour in an unsuccessful amendment to the legislation voted on later in the day, that the price cap should explicitly state that standard variable tariff customers will save at least £100 on their energy bills.
“Ultimately it would potentially create some unintended consequences to fix that amount at this stage in the Bill.
“Our first and primary objective is to think about protecting consumers, but we need to make sure that in setting the cap we also take account of the other factors that we need to consider.”
Nolan also said the design of the price cap would not be modelled on that introduced in Northern Ireland. He said: “The Northern Ireland cap…was designed specifically for one firm, for the previously dominant firm, so it may not be exactly wise to take it off the shelf for the cap in GB.”