Why Are Energy Prices Rising?

Many households are facing higher gas and electricity bills, as there’s been a massive jump in wholesale gas prices across the globe. See why it’s happening and what you can do to avoid paying more.

Many households are facing higher gas and electricity bills, as there’s been a massive jump in wholesale gas prices across the globe. See why it’s happening and what you can do to avoid paying more.

Sofia Hutson
From the Energy team
4
minute read
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Posted 12 OCTOBER 2021

Why are gas and electricity prices rising?

A lot of different factors are having an impact on the price of energy, both internationally and in the UK.

Globally there is greater demand, due to the world coming out of COVID-19 lockdowns and economies reopening. High demand in Asia for Liquified Natural Gas (LNG) and weather events in the USA means that less LNG than expected has reached Europe, according to the Department for Business, Energy and Industrial Strategy. Last winter was very cold, both in Europe and Asia, so there’s much less gas in storage than is typical. Russia has also been supplying less gas to Europe than usual.

There are additional problems for the UK too.

  • A fire at a National Grid site in Kent shut down a power cable supplying electricity from France
  • Summer 2021 was less windy than usual than in the UK, so there has been less wind power
  • Gas storage capacity is much lower than in continental Europe, meaning that more gas has to be bought at current higher prices.
  • Planned maintenance at some UK power stations has resulted in them being taken offline.

The combination of all these factors is leading to price rises for both gas and electricity – around 29% of the UK’s gas demand is for electricity generation.

Will the changes to the energy price cap affect me?

It depends on your contract and your supplier. The energy price cap limits the rates a supplier can charge for their default tariff. It applies to both standard variable tariffs (SVT) and prepayment meters. If you’re not on a fixed-tariff deal, it may well apply to you.

With the price cap:

  • Those on standard tariffs who use an average amount of gas and electricity could see an increase of £139, going from £1,138 to £1,277 a year 
  • Pre-payment customers could see an increase of £153, from £1,156 to £1,309

If you use more energy than average, you could see your bills rise even higher.

If you haven’t switched energy suppliers or tariffs for a while, you’re likely to be on an SVT. You can check your bill to see.

How much will energy prices rise by?

It’s hard to say. There are a lot of variables including:

  • How cold winter is
  • How much wind there is to generate renewable electricity
  • How quickly repairs and maintenance to power stations are carried out
  • How efficiently major energy suppliers have purchased their wholesale supplies, to protect them and their customers from short-term price spikes
  • How global demand holds up

If you’re on a fixed-rate deal, the amount you pay on your tariff shouldn’t increase. However, if you use more energy than you usually do, your bill will increase to reflect the extra power used.

What can I do if my energy supplier raises prices?

You can switch to another supplier, if you can find a cheaper tariff. We can help you compare energy prices based on your energy use, but due to energy price rises, we have only a limited number of tariffs that we can help you switch to right now.

Our Energy Savings Alert service will let you know if you can save. To set it up, get an energy quote from us.

It’s worth noting that a number of small energy suppliers have gone out of business recently and it’s predicted that a few more may collapse in the coming months.

If you switch to a provider who subsequently goes out of business, the energy regulator Ofgem will move you to a new supplier. Ofgem will come to an agreement with the new supplier about which tariff customers will be put on, which, at the moment, is likely to be more expensive.

What if I can't afford the increases to my energy bill?

If you can’t afford to pay your bills, you may be eligible for extra help like:

  • Affordable debt repayment plans or payment breaks
  • Emergency credit for prepayment meters
  • A £140 bill rebate under the Warm Home Discount

Talk to your energy provider and see what help they can give you. They have specialist teams available to discuss the available options. If you’ve got wider money issues it can help to talk to an expert. You can get free advice on dealing with debt from the government’s MoneyHelper website.

What can I do to save money on my energy bills?

Switching to a cheaper tariff can help reduce your bills so that you pay less for each unit of gas or electricity you use. But using less energy will also help keep your bills lower.

Read our guide to saving energy.

A smart meter can help you manage your usage and make sure you pay for the electricity you’re actually using rather than an estimate.

Making your home more energy efficient can really help. Improving insulation, or getting a more efficient boiler or double glazing can help over time, although there is an upfront cost here.

Some companies may offer a dual fuel discount if you get both your gas and electricity from them too, so it’s worth seeing if that could help.

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