Energy prices here in the UK have risen sharply over the past few months to reflect the huge surge in the wholesale costs of gas and electricity. This has in turn, created an unprecedented situation in the industry where consumers find themselves unable to save by switching to a new deal.
Some smaller suppliers have unfortunately gone bust while larger suppliers have withdrawn their offerings from comparison sites because they don’t want to operate at a loss.
Although this is all only temporary, being told you’re currently unable to save on your gas and electricity certainly isn’t what anyone wants to hear. Particularly when the colder weather, the time when our energy usage tends to increase, is just around the corner.
Why has the wholesale price of gas increased?
A combination of factors have led to the wholesale cost of gas rising steeply throughout 2021. According to industry regulator Ofgem, the increase can be attributed to a huge surge in the demand for gas without the supply to back it up.
The need for gas in the UK increased significantly as businesses emerged from the nationwide lockdown and got back up and running. Currently however, the EU’s gas storage facilities are only filled to 60% of their capacityꜛ.
Lower wind generation and colder weather across the continent along with smaller deliveries of gas through the European pipelines, due to unexpected maintenance and technical issues at production sites, have all contributed to this.
Why has the wholesale price of electricity increased?
The wholesale price of electricity is partially linked to the wholesale price of gas so if the latter increases, the former will too.
There have also been some further problems at ground level which have impacted the production of electricity. For example, a cable that’s able to transport a huge amount of power from France to England is currently unusable due to a recent fire and maintenance that’s ongoing at a National Grid site in Kent.
What effect has the energy price cap had on the situation?
It was announced on 6th August 2021 that Ofgem’s energy price cap is to rise by £139 from £1,138 to £1,277, a decision which was also made due to the rising wholesale prices of gas and electricity.
The price cap aims to protect customers on default tariffs, which don’t charge a set price per single unit of energy so your bills will fluctuate depending on your usage, by limiting how much suppliers can charge. Now that the price cap has increased, suppliers are free to raise the price of their default tariffs to match it.
Is there anything I can do about these expensive energy costs?
The energy market is incredibly unpredictable at the moment and while you can’t influence what deals are currently on offer, it is important that you stay informed about the whole situation.
Here at Energy Helpline, we want to support our customers as much as possible during these challenging times. Get in touch on 0800 074 0745 to speak to one of our friendly, knowledgeable energy experts who will be more than happy to answer any questions you may have
Whilst on the phone to us, you can also request to be put on our mailing list. This way we can let you know as soon as there’s any improvement!
What will the energy industry look like in the future?
With changes happening almost daily, it’s incredibly difficult to say in which direction the industry is headed or when suppliers will decide to bring their cheaper deals back.
Something that is definitely scheduled to happen next year however is Ofgem’s first of two yearly revisions to the energy price cap in April 2022. Unfortunately, if wholesale gas and electricity prices continue to rise Ofgem may be forced to raise the cap even further.
ꜛPolitico - August 2021.