What’s happening with energy prices?

You may have read the news that Ofgem (the energy regulator) has announced that wholesale energy costs have been increasing, and that your energy prices will be affected. 

Why have energy prices increased?

Wholesale energy prices have doubled over the last six months. This is as a result of the world emerging from lockdown, gas prices hitting a record high and global fossil fuel prices driving up inflation for consumers. You may have also noticed the impact on your other commodities such as your petrol and diesel costs.

Typically, the demand for gas is much higher in winter than during the summer. Gas is stored in large underground caverns during the summer for use in the winter. Across Europe, gas storage has been much lower than we would have expected to see at this time of year, and the battle of supply and demand has had an impact on prices, resulting  in summer and winter price rises.

Why does Europe affect energy prices in Great Britain (GB)? 

The GB gas market is interconnected with the rest of Europe – what we’re seeing in GB is replicated in Belgium, France, The Netherlands and Germany, they too are facing much higher prices this winter.

Electricity prices are also impacted. Even though renewable sources now account for the largest share of overall generation, gas-fired power stations provide the top-up required to meet demand and this usually sets the price.  As a result, electricity prices for the coming winter are also at all-time highs.

The price rises we’ve seen this year are different from previous price spikes – instead of just lasting a few days, the forward price for the whole of winter 2021/22 (Oct-Mar) has increased; to more than double the level we would normally expect.

What does this mean for your energy bills?

If you are on a Standard variable rate (which are also known as SVT or SVR tariffs), the energy regulator sets the energy price cap (the maximum price that energy suppliers can charge on a standard tariff), this tariff is reviewed every April and October.

The regulator has confirmed that this October the price cap will increase to accommodate the rise in wholesale costs. The energy price cap will rise by £139, this means a customer with typical consumption will face a bill of up to £1,277 per year. The price cap usually lags behind the wholesale market - so if prices remain at their current levels we should expect another increase in April.

Locking your tariff into a fixed deal can provide you with some protection from volatile prices, as the price will be locked in for the duration of the contract, typically 12 or 18 months. However, when you sign up to a new tariff or roll-off onto the standard variable tariff you will see this increase in your prices.

It is important to note that the fixed element of your tariff relates to your unit price/s and standing charge. Your direct debit may change depending on your consumption  

What do I do if I am struggling to pay?

We appreciate that this news will be unwelcome, we understand that many customers have been under pressure due to the Coronavirus pandemic.

Please reach out to us if you are struggling to pay. If you need to speak to us you can email us at hello@homeshift.com or call us on 020 3002 7703, we are available Monday to Friday 9am to 5pm (excluding bank holidays).

It is really important, even more so now, that you regularly provide us meter readings so that we ensure that your bills are accurate. The good news is, we are in the process of rolling out smart meters, which ensure that we receive regular meter reads automatically. If you’re still waiting to receive your smart meter you can help by submitting monthly meter reads via your dashboard.

Want to know more? 

Here are a couple of graphs that show the wholesale gas price trend and the 5 year average of European gas storage:

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Source: Marex Spectron. Typical (median) and extreme prices based on analysis of day-ahead gas prices from 1st October 2017 to 5th August 2021.

 

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​​Source:ICIS European Spot Gas Markets, August 10th 2021



 

(Article updated August 2021)

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