Updated 7th October 2021
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 surged by 250% this 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.
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 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.
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, 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 in which case the price cap could increase again. If it does, households could be in for another price hike.
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. When the price cap increases in April it’s likely if you switch now you’ll pay more in the summer too.
Standard Variable Rates currently look like the best option, however if you prefer to fix this is an option.
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.
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: