Energy bills could go up four times a year under new Ofgem plan

Price cap would be reviewed every three months under new proposals

Regulator Ofcom has said the price cap on household energy bills could be reviewed four times per year in a move it says would help people to better manage the cost of their gas and electricity.

Jonathan Brearley, Ofgem's chief executive, admitted that the changes could result in families seeing their energy bills hiked four times in a single year. But it would also mean that bills come down more quickly, he added.

Under current rules, the price cap is reviewed twice a year.

The move comes amid a worsening cost of living crisis, with people across the UK facing the biggest squeeze on their incomes in the post-war period.

The cost of fuel, food and energy has risen in recent months. Inflation currently sits at 7 per cent and the Bank of England has warned it could hit 10 per cent later this year.

Food banks say they have seen a surge in demands amid the cost of living squeeze (Getty Images)

Rising energy costs have been the biggest contributor to inflation, which has been exacerbated by Russian president Vladimir Putin's invasion of Ukraine.

Ofgem in April lifted the energy price cap, meaning millions of people across the country saw their bills increase by hundreds of pounds overnight. The price cap is set to be lifted again in October, with further price rises expected as a result.

Speaking to Sky News on Monday morning, Mr Brearley said inserting two new reviews into the year would allow suppliers to pass on a potential fall in prices to customers, while also protecting firms from the cap.

He said: "Today's proposed change would mean the price cap is more reflective of current market prices and any price falls would be delivered more quickly to consumers.

"It would also help energy suppliers better predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures, which ultimately pushes up costs for consumers."

He added: "The last year has shown that we need to make changes to the price cap so that suppliers are better able to manage risks in these unprecedented market conditions."

After a consultation, Ofgem hopes that the changes could come into force from October, meaning the first change under the new system would be made in January.

In April, energy prices soared by up to 54 per cent for the average household (PA Wire)

The energy price cap - currently at a record £1,971 per year for the average household - is reviewed every six months and changed in October and April.

Ofgem considers a range of information when deciding where the price cap should be set. The price that energy suppliers pay for the gas and electricity they buy is a major part of this.

Over the past year gas prices have risen so rapidly that suppliers were often forced to sell the gas for less than they bought it for due to the price cap.

By changing the price cap more often, Ofgem will make it more reflective of international gas prices, taking some of the pressure off suppliers.

The proposed changes to the cap will also allow suppliers to recover some other costs in a better timescale.

"Our top priority is to protect consumers by ensuring a fair and resilient energy market that works for everyone," Mr Brearley added.

"Our retail reforms will ensure that consumers are paying a fair price for their energy while ensuring resilience across the sector."

The government has so far introduced a number of measures to help people with the cost of living crisis. But there is widespread that the policies currently in place do not go far enough in helping the poorest families.

Labour has called on the government to introduce a windfall tax on the profits of oil and gas giants. It says the move would raise around £2bn give families up to £600 of their bills.

Downing Street initially rejected the idea but has in recent days suggested it could change course on implementing a windfall tax.