Energy prices could increase again in the summer after Ofgem handed itself new powers to make emergency changes to the price cap.
The watchdog said in a letter to suppliers that it would look after households by helping energy firms.
It comes just a day after it was announced that energy bills will increase by as much as 50 per cent on April 1.
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Officials claim that changes to the price cap will reduce risks for suppliers - this includes the ability to change it more than twice a year.
Ofgem’s letter said: “The changes introduced in cap period eight will benefit customers by reducing systemic risks for suppliers.”
Because dozens of energy suppliers have gone out of business throughout the previous six months, it will cost each household an average of £68 to protect customers of these suppliers.
It was the result of a massive rise in wholesale gas prices which companies supply to households.
The limited price cap meant that companies were forced to sell the fuel at a loss.
Should this happen again in the next six months, Ofgem now has the power to increase the price cap.
It could result in bills increasing again after already rising by nearly £700 for the average household.
Despite these powers, the regulator has set itself a series of criteria to instigate any change so that the price cap is not changed wantonly.
Ofgem said: “The inability to update the cap more frequently reduces the flexibility for us to consider how best to respond to exceptional circumstances, such as the one we are currently seeing.”
Before it makes any emergency changes, the watchdog must feel five criteria have been met: the change in energy prices, or another event affecting suppliers, must be “rare”, it must be outside suppliers’ control and difficult or impossible to avoid. It must also affect the costs of supplying energy and it must require urgent action.
“We do not intend to use an in-period adjustment to enable suppliers to recover costs caused by risky behaviour or poor risk management strategies,” Ofgem said.
Ofgem will only have the power until October and is currently in talks with the industry to create a contingency plan after that period.
It is likely that the price cap will be changed once every three months, rather than twice yearly.
A "price cap contact" might also be set up to ensure customers are stuck on their suppliers' price-cap-linked tariff while considering other solutions.
The price cap will increase on April 1 to £1,971 for typical-use households. The announcement of the new cap, which is £693 higher than the current level, was made on Thursday.
The Bank of England also added fuel to the data around the cost-of-living crisis on Thursday when it predicted that inflation could hit more than 7% in April.
