Response to Ofgem consultation on medium term changes to the price cap methodology

NEA argues that our clear preference is for the Enhanced Status Quo option. In order to ensure that it works best for households, NEA recommends that any reopener is specific to unpredictable parts of the price cap, such as the wholesale cost element, and other predictable elements remain unchanged in the reopener (such as policy and network costs).

The quarterly update option could become acceptable, if not optimal, with several changes:

• If the updates were set up so that the price cap did not change over the winter period. This is a crucial period for fuel poor households as they require confidence to use their heating to maintain a healthy temperature. Updating the cap in March, November, May and August, for example, would achieve this.
• Predictable costs, such as policy and network costs, should only change once per year, limiting the sharpness of changes with each additional update.