As we've previously written, energy suppliers are coming under increasing pressure over soaring energy prices. The energy price cap is designed to protect consumers from sharp price rises due to fluctuations in wholesale prices. While the cap increased by a record 12% on 1 October, the increase has not kept pace with wholesale costs, forcing a number of energy providers into insolvency.

Ofgem's price cap is calculated by looking back at prices over the previous six to twelve months, which means it cannot keep up with fast-moving changes in the market. Ofgem is therefore due to launch a consultation in November into the price cap and the methodology behind it.

In a letter to the industry, Ofgem's chief executive wrote "In order to protect the interests of consumers, we must ensure that the regulatory frameworks, including the price cap, fully reflect the costs, risks and uncertainties facing the supply companies we regulate."  Any changes to the price cap and the regulatory framework will be revealed in February, but it remains to be seen how a balance can be struck between shielding customers from steep price rises and creating a business model that is sustainable for energy providers.