In recent weeks, the UK energy industry has seen significant energy price rises, a number of suppliers going bust and the introduction of Ofgem’s latest price cap. It’s been a turbulent time to say the least and at the moment shows no signs of letting up.
For consumers, this has also been a particularly challenging time and it has raised a lot of questions about what all this means for our energy bills and what can be done to help navigate through this industry crisis.
So to help, we’ve detailed and answered some key queries with advice and guidance that you can use to get a better understanding of how you might be affected by the crisis, and what options you have to avoid any further issues.
Why are energy bills going up?
There are a number of reasons why we’re seeing increasing energy prices, but the main cause is that wholesale energy prices (what providers pay for our gas and electricity) are at record highs. Plus, reserves of gas and electricity aren’t as plentiful as previous years. This has led to issues with supply and demand.
This stems from a number of factors, including the cold winter we had last year where as a nation we used more gas, lower amounts of gas imports from Russia, complications from Brexit and a drop in our renewable energy production due to a lack of windy and sunny weather.
Currently, prices are 250% higher than they were in January this year and have gone up 70% in the last month alone. We’re essentially enduring lots of negative factors all at once and unfortunately the costs are now hitting consumers.
What is the new energy price cap?
Ofgem’s latest energy price cap rolled out on October 1st and, as previously reported, this will see annual bills rising by £139 for those on standard variable tariffs (SVTs). Prepayment meter customers will see increases of £153, as prices go from £1,156 to £1,309.
This price cap is something Ofgem sets every six months and is designed to limit the amount suppliers can charge customers for their energy. But, while this may seem like good news in the face of the high wholesale costs, the new cap is still a 12% price rise for those on the affected tariffs.
Anyone on a fixed-rate tariff won’t see their rates change, unless their tariff comes to an end.
Why are suppliers going bust?
With the high wholesale energy costs, the suppliers who have gone bust ended up having to pay more for the energy they were supplying to their customers than they were recouping from customers paying their bills.
So far (as of October 1 2021) nine suppliers have gone out of business – People’s Energy, Utility Point, MoneyPlus Energy, PFP Energy, Avro Energy, Green, Enstroga, Symbio Energy and Igloo Energy.
All of these suppliers had offered cheap fixed-rate tariffs that were no longer viable in the current situation.
What happens if my supplier goes bust?
If your supplier fails, the energy regulator Ofgem makes sure that your supply of gas and electricity continues and they automatically move you over to a new provider. However, this new tariff won’t be the same as the one you were on with your old supplier and will most likely be more expensive.
What happens if I’m in credit with a supplier that’s gone bust?
If you’re still in credit and your supplier goes bust, your new supplier currently has to honour anything that you’ve built up and factor this into your new energy bills.
Can I still switch supplier?
After Ofgem has moved you over to a new supplier (this can take about a week to go through) you can still look to switch to another provider if you want – you also won’t incur any exit fees if you do.
However, the issue you have right now is that it’s highly unlikely you’ll find any cheaper tariffs on the markets when running an energy comparison - and the tariff you end up on is likely to be amongst the best energy deals around at the moment.
With a little research you can still see who the best energy suppliers are right now, but this is more in terms of service than savings.
If I’m on a fixed tariff with a stable supplier, will I be affected?
The good news here for consumers in such a situation is that your energy bills won’t change, you’ll continue to pay the same rate for the duration of your deal.
Can I get extra help with my energy bills?
If you have concerns about being able to afford your energy bills, there are some steps you can take to help reduce them or make them easier to manage:
- You can try to cut down on your energy use to reduce your costs. We’ve previously explained a number of top tips you might want to try.
- Citizens Advice are recommending that consumers who have concerns should contact their current or new supplier directly to see if they can change or adapt their payment terms.
- Schemes like the Warm Home Discount are available and those who qualify can get £140 off their winter energy bills.
What will happen to the energy industry in the future?
Unfortunately, with wholesale prices continuing to rise, we’re likely to see further increases to our energy costs, particularly as we head into the colder months. The global supply and demand problems are subsequently likely to get worse and already there’s speculation the next price cap in April will be much higher.
However, if the energy markets do start to settle down and aren’t as volatile, wholesale prices will return to normal levels and our bills will then also start to come down. Hopefully this is sooner rather than later.
