- UK's energy regulator Ofgem has proposed that the energy price cap should be revised quarterly.
- It will benefit consumers sooner when the current record-high rates drop, it said.
In a bid to provide relief to millions of Britons troubled by the high energy bills, the country's energy regulator Ofgem has proposed new plans to review the price caps on energy bills more frequently from the current half-yearly updates. Notably, people in the UK are facing the biggest squeeze on their pockets as inflation has reached decades-high levels, and it is expected to rise further following the government's decision to raise the cap from April. The energy price cap is the maximum amount that companies can charge for electricity.
In its 'minded-to' consultation, the regulator has proposed to review the cap every quarter from October so that when the prices drop from the current record highs, the consumers benefit from it much sooner. Additionally, energy suppliers will also benefit from the more frequent revisions as up-to-date prices will help them accurately calculate how much energy they need to purchase for their customers. It will minimise the risk of supply failures that ultimately lead to price hikes, Ofgem said.
©2022 Kalkine Media®
Current energy prices cap in UK
From 1 April, the new energy price cap came into force, which raised the average household bill under the standard tariff to £1,971 per year from £1,277 earlier. From October, the energy bills are expected to rise to as much as £2,600 a year when the next energy price cap revision happens.
While the proposal is expected to bring much-needed relief to the UK households, let us see how FTSE-listed electricity and gas utility stocks reacted to the news.
National Grid Plc (LON: NG.)
The FTSE 100-listed company focuses on the transmission of electricity and gas and has operations in the UK and the US. For the year ending 31 March 2022, the company expects a higher underlying operating profit than its previous guidance from its electricity transmission and distribution business in the UK due to the higher inflation rates.
Shares of National Grid Plc were trading 0.19% higher at GBX 1,222.29 at 11:20 am GMT+1 on 16 May 2022, with a market capitalisation of £44,488.52. The share price has risen more than 30% over the past one year, while the year-to-date or YTD return is currently at 15%.
SSE Plc (LON: SSE)
The Perth, Scotland-headquartered multinational energy company's business includes power generation, transmission, and distribution. It operates in wholesale, retail, and network segments and generates electricity through both renewable and fossil fuels. SSE Plc recently joined a group of companies working in the power sector across the globe to create a new initiative for achieving net zero targets.
The company currently holds a market capitalisation of £19,762.60 million, and its shares were trading at GBX 1,861.78 at 11:26 am GMT+1 on 16 May 2022. The one-year return stands at 21.24%, while the YTD returns at 14.11%.
Centrica Plc (LON: CNA)
Listed on the FTSE 250 index, Centrica is a multinational energy company and owns British Gas, UK's largest energy supplier. The company reported a strong operational performance in the first four months of 2022.
With a market cap of £4,551.10 million, Centrica's shares have given significant returns of 45.54% to the shareholders over the past one year. The shares were trading at GBX 79.18, up 2.78%, at 11:37 am GMT+1 on 16 May 2022.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.