Keeping you informed. Energy price news - January 2022
You may have seen lots in the news about shortages of energy and increases in gas and electricity prices. Here we explain what’s going on and what it means for you.
What’s going on?
Wholesale energy prices have risen sharply over the past 6 months. Gas and electricity prices around the world have reached record levels. Some energy providers have ceased trading, because they can’t afford to buy energy to supply their customers at the increased cost.
This is why Ofgem increased the price cap in October to reflect the cost of supplying energy to Britain’s homes. It’s expected that the price cap will rise considerably in April and we know many of our customers will be worried about the impact of this.
Ofgem will announce the new level in early February, so that’s when you’ll be able to find out exactly how your energy costs will change.
All the information that we have for you right now is here, but we’ll update this as soon as we know more. You can also find our FAQ’s here in the meantime.
Here’s a quick digest of what you might have read in the news
- Current global wholesale energy prices are putting pressure on the energy market
- Some suppliers have ceased trading, because they can’t afford to buy energy at the current cost
- Ofgem may increase the price cap in April 2022
Table of contents
- What’s behind the rise in wholesale energy prices?
- Why do wholesale energy costs affect my bills?
- What is the energy price cap?
- Are all tariffs covered by the Ofgem price cap?
- How do Ofgem decide the price caps?
- Will Ofgem increase the price cap in April 2022?
- How are British Gas helping?
- Customers joining us from other suppliers through supplier of last resort
- Will my prices go up?
- What to do if my supplier stops trading?
- Want to join us?
- What to do if you’re struggling to pay
- Other ways to lower your energy bills
What’s behind the rise in wholesale energy prices?
High demand for gas and reduced supply are behind the surge in wholesale prices. Whilst prices were at record lows as countries locked down and demand plummeted during Covid-19, the speed of change since then is unprecedented.
- Countries recovered from the Covid-19 pandemic and reopened their economies, so the demand for global gas rose
- Last winter was colder than usual and so was this spring, meaning that more gas was used
- Low winds meant less renewable electricity was generated
- More reliance on gas-fired power stations
- Some power plants had to be closed for regular maintenance that couldn’t be completed during the Covid-19 pandemic.
Wholesale UK electricity prices are the highest they’ve been since the market was formed in 1990. Gas prices are the highest they’ve been for 15 years – up 250% since January. 1
Why do wholesale energy costs affect my bills?
Domestic energy bills are linked to wholesale prices. These are the prices energy companies, like us, pay for the gas and electricity we supply to you. Wholesale prices make up around 40% of a typical energy bill.
Ofgem, the energy regulator, has sets a limit on the maximum amount suppliers like us can charge for each unit of gas and electricity you use, and sets a maximum daily standing charge. These maximum charges are known as the energy price cap.
There are two types of price cap: one for default tariffs (often called standard variable tariffs) and one for prepayment tariffs (also known as pay-as-you-go tariffs).
It’s the price that’s capped and not your bill. So your energy bill can still go up or down depending on how much gas and electricity you use. But, the prices charged per unit and standing charge will never go above the energy price cap.
No. Your tariff will only be capped if you’re on a standard variable or default tariff. For British Gas customers the following tariffs are covered by the price cap: Standard, Standard PAYG, Standard Variable, Safeguard, PAYG Safeguard, Safeguard PAYGv2, FlexiPAYG Mar 2023, Welcome to British Gas, and The Peoples Tariff.
If you’re on a fixed-price tariff, the price cap doesn't apply. But when your fixed-price contract ends you will fall onto our Standard Variable tariff and be covered by the price cap unless you choose a new fixed-price tariff or switch suppliers.
Ofgem set their price caps by working out how much it costs energy suppliers like us to supply you with gas and electricity. These costs cover things like buying wholesale energy, maintaining supply pipes and wiring, and operating costs.
Ofgem review their price caps twice a year. Any changes they make will take effect on 1st April and 1st October of each year.
Ofgem are expected to look at wholesale energy prices between August 2021 and January 2022 when they set the next price cap. Because energy prices have risen sharply during this period – it means the price cap is likely to go up.
How are British Gas helping?
We’re welcoming new customers from other suppliers
Ofgem (the UK’s energy regulator) has asked us to help consumers and we’ve stepped in as Supplier of Last Resort (SoLR) for some of the energy suppliers which have recently stopped trading.
We welcome these new customers and will do everything we can to make the switch to us as smooth as possible. If you’ve recently joined us from a supplier which has stopped trading, we’ve produced a guide to help answer your frequently asked questions. You can also contact your old supplier.
Here are the latest updates for customers joining us from other suppliers. You're in safe hands and your supply won't be affected.
Our financial position is strong
British Gas has been around for over 200 years, and as a responsible energy supplier built on a sustainable business model, we're trusted by millions. We bought energy in advance (hedged) ready for this winter, which means our prices are as fair as they can be.
We want to help
In December we’ve launched a new £2 million fund to help our most financially vulnerable customers who’re struggling to pay their bills this winter. The rising cost of living in the UK has created financial difficulty for many people this winter. If you’re eligible, we’ll get in touch with you via letter or email. Then you just need to apply by 31 March 2022.
Will my prices go up?
If you’re already a British Gas customer:
If you’re on our Standard Variable, Standard, Temporary, Safeguard, Cap Tracker and Safeguard PAYG tariff your price increased on 1st Oct, 2021 in line with Ofgem’s energy price caps.
If you pay by Direct debit, we didn’t increase your payment amount to help keep costs affordable for you this winter. Your balance could still go up or down – so it’s always good to keep track of it. If you want to, you can make one-off payments or increase your regular Direct Debit to an amount that’s suitable for you.
If you’re on a fixed price tariff with us, then the price of your tariff won’t go up or down unless you choose to change your tariff, change how you pay us - for example you stop paying by Direct Debit - or the government or regulator does something or plans something that means the price must change - for example, changing the amount of VAT we must charge. We’ll always give you as much notice as we can if there is a change to your price.
If your fixed price tariff is due to end shortly, then please be aware your new prices will be higher than your old tariff. This is because the wholesale cost of energy is higher than what it was when you agreed your old, fixed price.
We’ve bought energy in advance, so you’re protected from the full costs and we can still offer you a tariff that could save you money long-term and help lessen the impact of future energy price increases. But remember, even the cheapest deals are a lot higher than this time last year, so prepare to pay more for now.
If you’re a customer with another supplier:
Most UK energy suppliers have raised the price of their standard variable or default gas and electricity tariffs to the latest energy price cap.
If you’re on a fixed price tariff and your supplier stops trading, then your old tariff will likely end. You’ll be set up on a new contract and given new prices by your new supplier, which will be higher. This is because recent price rises mean that customers, who agreed fixed prices a few months ago, are paying suppliers less for energy than it will cost the new supplier to buy the energy.
What to do if my supplier stops trading?
If your supplier stops trading, you don’t need to do anything. Ofgem will automatically assign you a new supplier. We’ve produced a guide that explains what happens if your supplier goes bust and the measures in place to help.
To see who your new supplier is, check the Ofgem website.
If your new supplier is British Gas, we’ll be in touch to welcome you as soon as possible.
Want to join us?
Wholesale energy prices have reached new highs recently and remain extremely volatile. So you may want to think about a fixed-price tariff for peace of mind and to help you budget and protect you from any further price increases.
What to do if you’re struggling to pay
We don’t want anyone to stop heating their homes or using power because they can’t afford it. If you find yourself in difficult circumstances, we want to help. If you’re with us, and are struggling to pay your bill, we can work with you on a payment plan that suits your needs.
The British Gas Energy Trust is an independently run charity, funded by British Gas. They may be able to advise you on fuel debt, point you in the direction of government grants for those struggling with energy bills, or in some circumstances, allow grants for debt relief.
If you’re a Welsh household on working-age benefits, you may qualify for a one-off £100 Winter Fuel Payment to help with your energy bills this winter. This is separate to Cold Weather Payments which are paid to households on certain benefits in England, Scotland and Wales by the UK government.
Other ways to lower your energy bills
Using less energy in your homes is a good way to save on your energy bills.
We’ve produced a guide that explains simple measures you can take to use less energy.
Source BBC News: www.bbc.co.uk/news/business-58620167