You would imagine many people might disagree completely with energy regulator Ofgem’s assertion this week that the price cap for household electricity and gas has “worked well to protect customers”.

The claim was made by Ofgem as it declared it was opening up “the conversation around the future of price protection as the energy market continues to evolve”.

Household electricity and gas bills have surged to excruciatingly high levels in recent years.

It would be easy to form the opinion that this lamentable development has proved beyond doubt that the energy price cap is unfit for purpose.

And it is difficult indeed to see how the prices that households have been forced to pay for energy in recent years could possibly have indicated the cap has “worked well to protect customers”, as Ofgem would have it.

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Ofgem this week stated its detailed view on this as follows: “The price cap, along with the temporary ban on acquisition-only tariffs, have worked well to protect customers from the ‘loyalty penalty’ where customers on default tariffs paid higher prices, and from the worst of the recent volatile markets and wholesale price surges that were a result of the energy crisis.”

Yes, prices are due to come down from Monday next week, but they will still be very high by historical standards.

Of course, there are forces other than the price cap at play here.

The Conservative Government has failed spectacularly when it has come to security of energy supply for the UK.

This has left the country very much at the mercy of global market forces, such as the surge in energy prices with the ending of coronavirus-related lockdowns and from Russia’s invasion of Ukraine.

Of course, the ruling Conservatives could through immediate bold action have done far more to mitigate the effect of market forces on consumers.

French President Emmanuel Macron took swift and decisive action to limit increases in energy prices for households in his country to far more manageable levels than the frightening increases in the UK.

The Conservatives did provide some support when the UK price cap went from the excruciating to the ridiculous, but this was lamentably inadequate.

It was announced last month that, between April 1 and June 30, the energy price cap would be £1,690 per year for a typical household using electricity and gas and paying by direct debit. Ofgem has noted this is £238 lower than the cap of £1,928 prevailing between January 1 and March 31 this year.

Before anyone breaks out the Champagne, the cap prevailing from April needs to be put in context.

Energy prices remain much, much higher than they were as recently as the spring of 2022.

In August 2022, Ofgem announced the energy price cap would increase to £3,549 per year for dual fuel for an average household from October 1 to December 31 that year.

Assistance from the UK Government by way of its “energy price guarantee” meant the cost of electricity and gas for a typical dual fuel household was actually £2,500 per annum during this period. The same applied when the price cap was at £4,279 between January and March last year and at £3,280 between April and June 2023. These are surely truly ridiculous levels.

A research briefing published earlier this month by the House of Commons Library notes: “The energy price guarantee was lower than the levels the price cap would have been in Q4 2022, Q1 2023 and Q2 2023. However, it still meant average prices increases of 27% in October 2022.”

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This 27% surge highlights the utter inadequacy of UK Government support.

The £1,971 per year energy price cap for a typical household that applied from April 1 to October 31, 2022 was a 54% increase on the £1,277 figure for the prior six months.

The research briefing notes: “The monthly increases in both gas and electricity prices in April 2022 alone were by far the largest ever recorded on a series going back to 1988. The annual increases to October 2022 were also the largest ever recorded on a series going back to 1970.”

These are striking points.

In May 2023, Ofgem announced the price cap for the third quarter of 2023 would fall to £2,074 for typical annual consumption at the time.

Noting moves since, the House of Commons Library research briefing observes: “The price cap fell again in October 2023 by 7%, increased by 5% in January 2024 and is set to fall by 12% in April 2024. Despite these falls in prices, average bills for typical annual consumption under the quarterly cap from April 2024 will be around £600…above their summer 2021 levels.”

This throws into stark relief just how grim the prices that households have had to pay for energy in recent years have been.

The £1,277 cap in place from the six months from October 1, 2021, calculated on typical use at that stage, might seem attractive relative to where we are now, but we should remember it was a record high at the time.

Between April and October 2021, the energy price cap was £1,138. And, in the six months before that, it was £1,042, again based on typical use at that time.

Simply looking at the £1,690 figure for the energy price cap that will apply for a typical dual-fuel household from April 1 relative to these figures, it is difficult indeed to see how it could be deduced that the regulatory mechanism has “worked well to protect customers”.

Ofgem has set out, as part of its discussion paper launched this week, a “range of options” on the future of the price cap.

It says these include “introducing a more dynamic cap with time-of-use-dependent unit rates to encourage consumer flexibility”.

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Ofgem also raises the possibility of “introducing a targeted cap which could be based on a variety of factors such as vulnerability”. Other options flagged are “introducing more flexible, market-based price protections such as setting a limit between a supplier’s default tariff and tariffs available in the market, capping the margin suppliers are able to make, or replacing the cap with a ban on acquisition-only tariffs”.

This is obviously a very wide range of options.

And it was put by Ofgem in the context of sweeping changes in patterns of energy consumption and generation.

The regulator said: “Energy retail markets are changing as increasing numbers of consumers change their energy consumption and begin using electric vehicles, heat pumps, and solar panels. Our increasingly renewables-dominated electricity sector will also reward consumers for shifting the time of their electricity consumption, which will in turn reduce costs for everyone.”

This context will probably be far more interesting to the regulator, and others whose day-to-day work is in the energy sector, than to households buckling under the weight of electricity and gas costs.

However, the decisions made on the actual price cap will have major implications for millions of households.

What should inform the option or combination of options that are chosen when the discussion over the future of the price cap concludes is the sure realisation that consumers need far greater protection from the vagaries of the energy market than the current arrangements have provided. Capping the profit margin which suppliers are able to make stands out as likely to be among the more effective options, but even that might well not be enough in itself.