The watchdog will publish a ‘minded-to’ consultation into the proposal.

At a time when consumers are being squeezed financially from all sides, the watchdog said a more frequent price cap would reflect the most up to date and accurate energy prices. 

The move would also help energy suppliers more accurately predict how much energy they need to purchase for their customers, reducing the risk of further supplier failures which ultimately push up costs for consumers. 

Jonathan Brearley, CEO of Ofgem, said: “Our top priority is to protect consumers by ensuring a fair and resilient energy market that works for everyone. Our retail reforms will ensure that consumers are paying a fair price for their energy while ensuring resilience across the sector.  

“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.  

“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.” 

Under the proposal, the price cap level/price would change every three months instead of every six months, while the amount of notice suppliers get of the new price cap level would be slightly reduced.

Citizens Advice Scotland social justice spokesperson Stephanie Millar said: “The cost of living crisis is squeezing household budgets to breaking point across the country, so while it is positive to see Ofgem consider action that could help, any proposals need to be thought through clearly and put consumer interest first.

“While we could understand the benefit of more up to date prices being reflected in the cap, and potentially fewer of the extreme increases we have seen in the last year, the potential of the cap increasing in the winter will be worrying for people struggling already, and could make it more challenging for people to budget if prices are changing more regularly.”

The consultation is open until June 14. Ofgem would be looking to implement the reforms from October.