2021-181 Analytical Support to Deliver Price Cap Update

In 2018 the Domestic Gas and Electricity (Tariff Cap) act was passed. The Act sets out the framework for a temporary cap on domestic energy standard variable tariffs (SVTs) and default tariffs. It also sets out that Ofgem is responsible for developing and implementing the methodology for setting the level of the cap. Ofgem introduced the methodology for setting the cap via licence conditions in November 2018, and the cap came into force on 1 January 2019. Support is required by Ofgem to provide resource to deliver a number of elements linked to the Statutory deadlines surrounding the price cap update on the 7th February. Ofgem also requires support in analysis and drafting of a Price Cap Reform policy consultation document for publication around 30 January. The consultation is expected to then last around four weeks. The policy consultation will set out detail on Ofgem's main policy options for reforms to the cap to address key challenges relating to wholesale market volatility, including changes to the observation window and the 'evergreen' nature of the cap.