Keeping you informed. Energy price news - October 2021
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?
Current global wholesale energy prices are putting pressure on the energy market. Gas and electricity prices around the world have reached record levels. Some smaller suppliers have ceased trading, because they can’t afford to buy energy at the increased cost. This leaves them unable to fulfil their commitments to supply gas and electricity to their customers
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
- Gas prices around the world have reached record levels
- Some smaller suppliers have ceased trading, because they can’t afford to buy energy at the current cost
- More smaller suppliers are expected to go out of business.
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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.
How are British Gas helping?
We’re a responsible energy supplier built on a sustainable business model. The name “British Gas” has been around for over 200 years and is trusted by millions. We’re in a strong financial position and we’ve fixed the price of our energy purchases (hedged) ready for this coming winter. Our customers can rely on us.
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.
So far, we’ve taken over the energy supply of around 100,000 customers from PFP Energy and MoneyPlus and we’ve agreed to take a further 356,000 domestic customers and 1,000 business customers supplied by People’s Energy.
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.
- If you are a PFP Energy customer, please read our latest update or contact PFP Energy directly
- If you are a MoneyPlus Energy customer, please read our latest update or contact MoneyPlus Energy directly
- If you are a People's Energy customer, please read our latest update or contact People's Energy directly.
Our parent company, Centrica, is working closely with government and Ofgem to make sure consumers are protected and not left without an energy supplier. Rest assured, we’re doing everything we can to help stabilise the energy market as we enter the winter months and fulfil our purpose of helping customers to live sustainably, simply, and affordably.
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 from 1st Oct, 2021 your prices will increase in line with Ofgem’s energy price caps. But we won’t increase your Direct Debit to help keep costs affordable for you this winter. Customers who would rather manage the price increase immediately can amend their direct debit via the British Gas app or by contacting us.
Switching to one of our fixed price tariffs could save you money long-term and help protect you from energy price increases over the next year. What’s more you can get a price in seconds.
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 your new prices may be a 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.
Agreeing a new fixed price tariff for one year may help protect you against two further price cap changes. Whilst variable tariffs can seem cheaper than fixed tariffs, they won’t protect you from two further price cap reviews in the next 12 months. If you’re worried about future price increases, then a fixed price tariff could be the better option for you.
If you’re a customer with another supplier:
Several UK energy suppliers have said they’ll raise the price of their standard gas and electricity tariffs to the new 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. This is because recent price rises mean that a lot of 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.
Want to join us?
If your fixed tariff is due to end soon, then compare and switch to protect against future price rises. But remember, even the cheapest deals are around 45% higher than this time last year, so prepare to pay more for now. While variable deals may look cheaper now, it’s possible those rates will go up. Just enter your postcode to get a quote in seconds.
What to do if you’re struggling to pay
Hopefully this is a temporary disruption to the energy market, but if you find yourself in difficult circumstances, we’re here to help. If you’re with us and you’re struggling to pay your bill, we can work with you on a payment plan that suits your needs.
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