Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what the implications are for his legislative proposals on requiring Ofgem to review the price cap only once a year from 2020 of Ofgem’s decision to increase the level of its pre-payment meter price cap as a result of increasing wholesale costs.

The draft Bill proposes to require Ofgem to review and report on whether the conditions for effective competition are in place and to make a recommendation to the Secretary of State. This will inform the Secretary of State’s decision on whether the cap should remain in force. The first review and report would be in 2020 and each year, up to 2023, that the price cap remains in place.

In designing the methodology for setting the level of the price cap we would expect that Ofgem would need to consider how to take account of relevant changes in costs such as for wholesale energy.

The prepayment safeguard tariff was introduced by the Competition and Markets Authority (CMA) following its investigation into the energy markets. The methodology set by the CMA, and administered by Ofgem, to calculate the cap is based on wholesale costs, network costs, policy costs, operating costs, and costs specifically associated with prepayment meters.