Ofgem is preparing to unveil how its proposed energy price cap should be designed.
The energy regulator said in an update on the retail price cap, which was published on Tuesday (6 March), that it will “very shortly” publish the first in a series of working papers explaining its emerging thinking on the design principles for a default tariff cap.
And the letter from Ofgem’s Retail Price Protection associate partner Anna Rossington says that proposed licence changes are due out in August, assuming the government achieves Royal Assent for its price cap legislation before the summer recess. The bill cleared its first Parliamentary hurdle on Tuesday when it passed its second reading in the House of Commons without a vote.
The timetable for implementing the price cap says a second working paper in April is expected to cover how market pricing data can be used to set the level of the cap and update it over time.
Ofgem is also planning to publish further working papers between now and May 2018 covering issues such as the principles underpinning the level of headroom suppliers will have in order to compete and the regulator’s approach to estimating companies’ own operating costs, including smart metering.
Another working paper will outline Ofgem’s approach to estimating costs outside of suppliers’ control such as wholesale prices, social and environmental policy obligations and network charges.
A fourth paper will cover the government’s proposal to exempt tariffs designed to support the production of renewable gas and electricity.
The letter also confirms Ofgem is pressing ahead with its work on how to extend the safeguard ceiling on vulnerable households’ bills to a further 2 million customers if the market-wide cap is not introduced by next winter.
The letter states Ofgem is continuing to develop its thinking on other proxies that suppliers could use to identify vulnerable consumers besides its preferred option of selected means-tested and disability benefits.
In Tuesday’s Commons debate on the price caps bill, ex-shadow secretary of state for energy and climate change Caroline Flint urged ministers to “beware” of proposals to exempt green and low-carbon tariffs from the price cap.
She told the Commons that generators were already “well rewarded” for supplying nuclear and renewable electricity.
Flint said: “The notion that any energy provider should charge a premium for so-called green tariffs does not stand up to scrutiny. Consumer support for 100 per cent green energy is welcome, but the idea that they should pay the most expensive tariff cannot be justified. I therefore hope that the Secretary of State will rule that out and deliver a comprehensive cap.”
Flint was backed by former Conservative cabinet minister Sir Oliver Letwin who said moves to promote green energy should be done on an “economically rational” basis.
Energy and climate change minister Claire Perry said customers should not have to overpay if they were on a green tariff.