Hi everyone,
I took a gander at the Ofgem website this morning and was shocked to see seven new consultations, all published last week, each aimed at amending the price cap and increasing our bills. This means Ofgem are looking to make seven different changes to the price cap over the next 3-12 months, with the aim of “ensuring suppliers are fairly compensated”, meaning increasing our bills to give energy suppliers more money.
Now, whilst they each seem like small increases, there are three things you should be aware of:
- Ofgem’s “upper estimates” are often lower than the final amount they actually add to our bills
- There are 30 million homes paying each of these amounts, and they are paid every year, so when you see a “£5 increase”, remember that this means £150,000,000 additional revenue every year for energy suppliers
- These figures do not include the extra you’ll pay for profit, headroom and VAT, which are all calculated as percentages of all of the other costs in the price cap – so higher costs also means increased profit levels for suppliers
I will be responding to each and every one of these consultations, with my usual view of “STOP INCREASING OUR BILLS”, if you’d like to get involved then please subscribe to my Newsletter on this website, I’ll email out links to consultation response, along with instructions on how you can get involved quickly and easily.
Below I’ve listed each consultation title (clickable link to the actual consultation page), the closing date of the consultation and then I’ve listed 2 prices, first is the “minded-to” position of Ofgem, i.e. the likely price increase consumers will see, the second is the worst-case Ofgem have presented, i.e. the highest possible increase from each consultation.
| ID | Consultation title | Closing Date | Likely change to the Price Cap | Highest possible change to the Price Cap |
| 1 | Energy price cap: benchmark consumption review | 25 September | +£8.70 | +£17.10 |
| 2 | Energy price cap methodology: Nuclear Regulated Asset Base (RAB) | 26 September | +£1.00 | +£2.00 |
| 3 | Energy price cap methodology: backwardation deadband | 25 September | CFI* | CFI* |
| 4 | Energy price cap methodology: contracts for difference review | 10 October | CFI* | CFI* |
| 5 | Energy price cap: unidentified gas allowance review | 10 October | £5.10 | CFI* |
| 6 | Energy price cap methodology: group correction factors | 26 September | £5.10** | £5.49** |
| 7 | Renewing the ban on acquisition-only tariffs (BAT) after March 2026 | 24 September | Anti-competitive*** | Anti-competitive*** |
*CFI is a ‘call for input’ which means Ofgem haven’t started the consultation process officially, they are looking for ideas on how the new allowances should work before creating proposals. This means we won’t know the potential costs of these for a few months.
**This is a statutory consultation, meaning it’s at the final stages of being complete, but Ofgem completely omitted any information of potential increases to the price cap in pounds-and-pence figures. They mention some vague 1.46% uplift of an element of the price cap, but do not align that to an actual cost. I have emailed asking for more information.
***Whilst this isn’t an allowance, they are looking to extend the ban on tariffs that are specific for new customers only, and continuing to allow retention-only tariffs (i.e. tariffs that are only accessible to current customers). I discuss this in more depth below.
What are Ofgem trying to achieve?
Consultations
Changes 1, 2, 5 and 6 from the table above are simple changes, they’re looking to increase the costs in the price cap. Effectively, Ofgem are saying that suppliers aren’t being fairly compensated, and Ofgem believe that increasing consumers costs in these areas will provide more stability to the domestic retail energy market and therefore will increase investment in our energy market. I’ve always been of the opinion that Ofgem should be protecting consumers and putting our bills before what energy suppliers want, but that hasn’t been the reality of our energy regulator for a while.
Overall, I predict these changes will end up adding around £25-£30 a year, before VAT, profit and headroom. Most of this will be applied to our bills by April 2026 and they won’t be the only additions we see at that time.
I also want to add that item 6 from the table above hasn’t got an actual price attached, I’ve found a spreadsheet that kind of indicates that electricity wholesale costs account for £366 of the October 2025 price cap, and the consultation document talks about adding 1.46% for electricity losses, so in the table above I’ve simply guessed a range of 1.4% – 1.5% of the electricity wholesale cost as the potential increases, which is how I got the £5.10 – £5.49 range. This could be completely wrong though, I have emailed Ofgem asking for exact figures, I’ll update the above table once I know more.
Calls for Input
Changes 3 and 4 from the table are calls for input, this means they aren’t actually proposing any changes yet, instead they are simply saying “here is the problem, how do we fix it?”. They are looking for ideas. The problem with calls for input is that the only companies with enough money to funnel into a decent and professional response are the energy suppliers, network operates and distribution hubs, in-other-words, those that stand to profit hugely from a change.
As an example, let’s say British Gas convince Ofgem to add a £5 cost to your bill. Well British Gas has about 6 million domestic customers, so that means they will get £30m extra revenue from that one decision, so they can afford to higher experts or spend of hundred thousand pounds on consultancies to give in-depth analyses on why this £5 increase is essential to the future of our energy markets – most of which is a steaming pile of horse manure.
Downside: I expect these two calls for input will result in increases on our price cap and we have no idea (right now) by how much they will increase.
Upside: A call for input is the very first possible consultation stage, so we have every opportunity to push back, starting now and then pushing back on the policy consultation stage, then the statutory consultation stage as well.
The Ban on Acquisition-only Tariffs (BAT)
This has been around for a few years, it came into force in April 2022. This is a ban on suppliers offering cheap deals to new customers only. Simultaneously, Ofgem have put in place a rule that allows suppliers to offer cheap tariffs to existing customers only.
This has to be one of the most divisive decisions Ofgem have made, a lot of people love these rules but I don’t. The purpose of privatisation was to improve efficiency and bring down costs through competition, whether or not I like a privatised energy market (I don’t) is irrelevant, it’s what we have. With the bat on acquisition-only tariffs and with Ofgem allowing suppliers to offer super cheap tariffs to just their customers, they have destroyed competition in the retail domestic energy market. Privatisation has generally sucked, but at least prior to the crisis we saw a lot of cheap deals that allowed the engaged consumers to find good deals. Now we have a privatised market with no competition, meaning everyone is just stuck on high-priced energy deals, it’s the worst of both worlds.
When the ban was introduced in April 2022, it was supposed to be in place for just one year. Then they extended it. Then they extended it a second time. Then they extended it a third time… and now they are consulting on extending it fourth time.
You best believe I’ll be pushing HARD on rejecting this fourth extension. The main reason it’s still in place is because energy suppliers love it. They can offer a slightly cheaper deal to their customers than their competitors can, without having to offer that deal to the whole market. It means suppliers can hoard their customers and there is nothing their competitors can do, so the supplier keeps getting huge profits, they don’t have to spend on marketing or work at becoming more efficient.
You’ll see a lot from me on this, please keep an eye out and get involved in the consultation responses when it comes.
Thanks all, this was just an informational blog about the increases Ofgem are looking to force upon us over the next year, I’ll keep you updated on all of these over the next few weeks.
Richard Winstone
The Regulator Guy.
