Updated 17th January 2022
This blog discusses the energy crisis affecting the UK over Winter 2021/22. Our new blog contains the latest advice for 2022, the advice in this blog may now be out of date.
What’s happening to the energy market?
It’s been described as a ‘Perfect Storm’. Several small and unrelated factors have come together to cause a dramatic rise in wholesale energy costs (what your supplier pays before selling the energy onto you).
Wholesale gas costs alone have increased by over 400% last year and since the UK uses natural gas to produce a lot of our electricity, these prices have been affected as well.
The rapid increase in costs has left many energy suppliers in a tough position and they have ceased to trade, and many more are predicted to follow as we head into Winter.
Events in the energy market over September and August increased energy prices further, coming to a peak when one of our interconnectors with Europe, a cable that allows us to transfer power between the UK and France, caught fire.
Prices continued to rise through the Winter, leading to a record breaking increase of 435% compared to the year before in November, this was prompted by events across the globe relating to the supply and distribution of natural gas.
The energy price cap
The energy price cap regulates the cost of Standard Variable Tariffs, usually the most expensive on the market. It is reviewed twice a year in April & October. It was increased in April as costs had started to rise and it was announced in August 2021 that it would rise again by around £139 to £1,277 for those on Standard Variable Tariffs and by £153 to £1,309 for prepayment tariffs.
This roughly translates to around 21p per kWh for electric and 4p per kWh for gas.
It’s important to remember that even though the price cap is described as an annual total, it is actually a cap on the price of a standing charge and unit rate on your energy tariff, and not a cap on your total yearly payments. Essentially, if you use more, you’ll pay more.
When the cap was announced it would have taken energy prices to their highest for years.
Events in the energy market over September caused costs to skyrocket and cheap fixed price deals below the price cap started to rapidly disappear.
At the start of October it has been predicted that the price cap will rise again in Spring. The best estimate right now will put the cap at around £1,660 for an average customer, however at the time of writing this is still cheaper than the fixed price deals on offer.
It was further revised in November when experts predict a further price cap increase of 40% when the cap is reviewed in April.
This jumped further still, and in January 2022 it was predicted that come April we’d all be paying 50% more for our energy come April, if we’re on the standard variable rate.
How does this affect how much I pay?
The disappearance of fixed price deals below the capped cost of Standard Variable Tariffs is an unprecedented event. We’re usually always telling people to get away from these to save hundreds of pounds per year on their bills.
As of Tuesday 21st September 2021, the last remaining fixed price deal under the cost of the new October price cap was removed from the market.
This means at the time of writing, that the cheapest available tariff you can be on at this moment in time is the Standard Variable rate offered by each supplier.
Bizarrely, this also means that the cheapest deal offered by each energy supplier is the same price, give or take a few pounds.
The price cap is set to be reviewed again in the Spring and is all but certain to rise again, by around 50%.
If you’re currently on a cheap fixed price deal that’s coming to an end soon, you’ll be moved to the Standard Variable Tariff offered by your supplier, unfortunately this will be much higher than you were previously paying. The difference between the cheapest fixed price last year, and the price cap in October could be several hundred pounds.
What are my tariff options?
Options are unfortunately limited.
If you choose to stay on the Standard Variable Tariff, you will likely face an increase again in Spring. However this still looks to be cheaper than the fixed price deals available on the market.
If you choose a fixed price deal, you’ll pay more over the winter. Even with the price cap increasing in April, the fixed deals are likely to still be more expensive.
Standard Variable Rates currently look like the best option, however if you prefer to fix this is an option but bear in mind it’ll be more expensive at least in the short term. If you come across a deal, that based on tariff cost is <50% price increase you should switch to it. However it’s unlikely any such tariffs exist.
This will mean, by October 2022 most homes will be on the Standard Variable Rate and unless there are significant changes in the energy market, it is unlikely prices will decrease again in October and we could be set for yet another increase.
Fixed price deals that are currently available are more expensive than the predicted increase in October 2022.
Failing energy suppliers
Several energy suppliers have gone bust in previous weeks. This is due to them being financially unable to operate in the current turbulent market. Many more are predicted to cease trading in the coming weeks and months.
Customers are protected by Ofgem when a supplier goes out of business so there’s really no need to worry. If your supplier fails, you’ll be appointed a new supplier, known as the Supplier of Last Resort. They’ll move you to their Standard Variable Tariff and ensure you have a continuous supply.
We’ve dedicated an entire blog to answering questions about what happens if your energy supplier goes bust. Head there to find out more.
Warm Home Discount
With the price hikes many people are going to struggle to heat their homes this winter. That’s why it’s more important than ever before that if you’re eligible you apply for the Warm Home Discount.
It’s a rebate of £140 you can get towards your energy bills. Most larger suppliers offer the scheme and you can apply in the autumn and winter.
To find out more about it and to see if your supplier offers it and find out how to apply visit our dedicated Warm Home Discount blog.
Save energy around the home
The price increases are a worry for many of us. The best way to pay less right now is to use less. That doesn’t mean turning the lights off and sitting in the dark. There are plenty of practical actions you can take to help save energy around your home, reduce your energy bill and your carbon emissions too.
Using your heating controls and finding ways to prevent heat loss around your home can help you keep warm for less. Try do the following:
- Reducing your thermostat by 1°C
- Using your thermostatic radiator valves correctly – see our YouTube video.
- Keeping curtains and doors closed between rooms
In terms of your appliances and cutting down your electricity use, you could consider:
- Switching appliances and devices off at the plug rather than leaving them on standby
- Using a slow cooker or pressure cooker rather than an oven
- Using LED lighting and switching lights off when that room isn’t being used – see our Youtube video.
These tips are just some of the simple tricks we can help you with. For more advice contact our energy advisors on the details below.
Dealing with Debt & Self-Disconnection
If you fall behind on your bills you should get in touch with us for more advice.
You can also take a look at our dedicated blog for advice on how you can deal with this yourself.
If you’re on a Prepayment meter and a limited budget these increases could be a very scary prospect. If you are at risk of self disconnection, please contact us using the details below.
If you’d like further advice on anything discussed in the blog our energy advisors will be happy to assist. We can provide free and impartial energy advice tailored to your unique situation.
If you have any additional questions or would like advice tailored to your own unique situation you should get in touch to speak to one of our energy advisors.
Our energy advisors can be contacted by: