Dr Craig Lowrey, Principle Consultant at Cornwall Insight said:
“The shift to quarterly calculations and more allowance for the costs of stranding should wholesale prices fall were anticipated. The devil will be in the detail. With greater complexity comes greater risk of unintended consequences. It would have been useful to see more detailed evaluation of Price Cap levels for the new world against the old from a consumer perspective.
“However, our initial view based upon the information and draft models provided by Ofgem – and given current market conditions – is that by switching to the quarterly review system, Q4 (Oct-Dec) 2022 and Q1 (Jan-Mar) 2023 caps show an approximate 5% reduction on our forecast under the twice yearly system.
“If Ofgem stayed with the existing seasonal methodology where the cap was reviewed biannually, we predict bills would rise to £2,750 per annum for Winter 2022-23, however under the quarterly system this would reduce to around £2,600 for both Q4 2022 and Q1 2023, of course this is still a significant rise from the current Price Cap. However, due to the many variables which drive our forecasts, and the potential for further updates from Ofgem on their plans, this is subject to change.
“We are continuing to work through the information provided by the regulator in respect of Summer 2023 and beyond to determine how those under the proposed new structure compare with the existing seasonal approach.”
Notes to Editors
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About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.