Household Energy Bills set to Rocket for Millions
Millions of homes across the country could be set for their biggest price hike in almost 13 years this winter.
Industry experts are predicting gas and electricity prices to rocket to an average of £1,250 per year this winter, as global energy markets peak at levels not seen since 2008.
According to data from energy watchdog Ofgem, wholesale gas prices increased by 127% between August 2020 and February 2021, while electricity rates went up by 49% over the same period. Since then, some energy suppliers have reported that prices continue to rise.
What are the reasons behind the latest energy price increases?
The significant increase in wholesale market prices can be attributed to a combination of factors.
With many nations locked down over the Christmas and New Year period due to the Coronavirus pandemic, there was increased competition for gas to heat homes, which helped to drive up costs. Gas supplies in Europe remained limited as the cold weather extended into April and May.
Wholesale electricity prices are influenced by gas prices, as we still use gas to generate some of our electricity. In addition to this, some nuclear power plants were shut down for maintenance earlier in the year and wind farms were affected by less breezy conditions than those experienced in early 2020.
Increased network and policy expenses, as well as suppliers seeking to reclaim debt that customers are unable to pay as a result of the pandemic, could also be driving up prices.
The winter energy bill surge is more likely to catch households off guard this year, as suppliers are unable to make incremental increases to their standard variable tariff until Ofgem’s next energy price cap announcement, expected in October.
The price cap establishes a maximum amount that suppliers can charge for each unit of gas and electricity you consume and a maximum daily standing charge.
It was increased for the first time in two years in February 2021, despite the financial struggles faced by many households due to the economic impact of the pandemic.
Now, industry experts expect the regulator to raise the cap on the average dual-fuel energy bill for the next winter from £1,138 to £1,250, an increase of £112, due to rising costs of buying gas and electricity from wholesale energy markets.
So far, Bulb, Pure Planet and Octopus Energy - as well as its partner providers Affect Energy, Co-operative Energy, Ebico, M&S Energy and London Power - have all announced price increases to their standard variable tariffs.
Dr Craig Lowrey, Senior Consultant at Cornwall Insight, said: “Wholesale prices have been hit by a combination of factors. Underlying commodity prices have risen, so, too, have carbon prices reaching a high of €50 (£42.9) per tonne of carbon and more than doubling over the past year.
“On top of this, underlying gas prices have risen considerably due to a cold winter across Europe and low levels of gas in storage facilities. Moreover, the rising carbon, oil and liquefied natural gas prices have further supported this rise in underlying gas prices.”
How can I beat the price hike?
If your energy costs are getting out of hand, switching energy provider or tariff could help.
Here at Selectra, we recommend switching every 12-18 months or whenever your existing fixed tariff plan expires to get the best energy deal possible. If you leave a fixed tariff and don't sign up for a new one, you'll most likely be rolled over to your supplier's standard variable tariff, which is also usually one of its most expensive.
We keep a close eye on the energy industry and how it affects British consumers. To find out if you could benefit from a new energy plan with one of our partner suppliers, speak to an energy expert today on 020 3936 0059 or get a free callback now.