Within just a few weeks, UK householders will find out how much they can expect their energy bills to go up – with some predicting they may increase by as much as 50%. The industry regulator, Ofgem, is expected to announce the new price cap on 7 February 2022, a process that happens every six months.
As many people wait with bated breath for the announcement, you might be wondering why we are all set to suffer these steep price rises and if there is anything we can do about them.
Why Are Energy Prices Going Up?
Energy prices (particularly wholesale gas prices) have been rising sharply ever since the start of the autumn for several reasons.
In short, there has been a worldwide squeeze on gas supplies over the last 12 months, which is the result of a perfect storm of different factors conspiring together to create this current supply crisis.
While not inclusive all of the factors, below is a list of the primary reasons for a decreased supply of gas to the UK and Europe:
- An exceptionally cold winter in 2020/2021 put pressure on reserve supplies, dropping stored gas supplies.
- A summer largely devoid of wind made it hard to replenish those supplies and made it hard to replace those supplies.
- Demand from China for liquified natural gas skyrocketed, further reducing supplies.
- Geopolitical tensions between Russia and Europe has resulted in Russia not exporting anywhere near its typical amount of natural gas to Europe. Some pipelines are down 41% on exported volumes from last year.
All these events have come to put severe pressure on wholesale gas prices. While they peaked at just under 100p per therm last year, they have already reached 452p per therm in December 2021 and could rise further if there’s another period of cold weather either here or in continental Europe. For those not familiar with the term therm. A therm is a measurement of the amount of heat energy in natural gas, equal to 100,000 BTUs.
While other countries are grappling with the same issues, the UK is particularly struggling because so many of our homes have gas central heating, and we generate just under a third of our country’s electricity using natural gas.
How Can You Protect Yourself from the Expected Price Rises?
The energy cap is currently protecting customers against the enormous increase in wholesale gas prices. The energy price cap is backstop protection calculated by the regulator Ofgem. It applies if you’re on a default energy tariff, whether you pay by direct debit, standard credit, or a prepayment meter.
The regulator will have to increase the price cap to avoid more energy providers going bust. More than 4 million households have been affected by energy providers going bust, and if the cap remained the same, more would go under, including several major players. Thus, the price cap is set to increase to reflect the new environment we find ourselves in.
The good news is that there are at least some measures that can take the sting out of those price rises.
Make Changes to Your Domestic Usage
For example, the Energy Saving Trust has the following suggestions:
- Turn your thermostat down one degree – £55 annual saving
- Switching to LED bulbs – £30 annual saving
- Draught-proof your home – £25 annual saving
- One less wash per week (dishwasher or washing machine) – £8 annual saving
For more ideas on how you can reduce your energy bills, you can visit the Energy Saving Trust Website.
Upgrade Energy-Using Appliances
Another drain on your energy usage is old and inefficient appliances. One of the worst offenders for your domestic gas consumption is your boiler. If you have a boiler that is 10-15 years old, a new boiler installation could improve your efficiency from 80% to 90% and above (known as A-rated).
Sign Up to a Fixed-Rate Tariff and Hedge Against Further Price Rises
Lastly, you can “hedge” your energy bills. This is the process of signing up to a fixed-rate tariff price guaranteed for a specific period (usually 12 or 24 months). While there are no fixed-rate deals that offer better value than the current energy cap, with that cap set to rise by 51% or more in the coming weeks, you can lock in a price below those increased prices today and save yourself money in the long run.
Speak to a GHS Engineer to Assess Your Options Today
If you are worried about the upcoming increases to the energy price cap, then it’s worth giving our Gas Safe Registered engineers a call about your inefficient gas-using appliances. They can discuss options with you, including upgrading to a more efficient gas boiler or even making the switch to an electric boiler (not suitable for all households) or air source heat pumps.
Our team is available on 01329 285993 or via email at info@ghs.me.uk for advice.
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