2018 was a bad year for energy customers and companies alike. Not only did households have to contend with a record number of price hikes – a whopping 57 rate rises, amounting to a rise of about £74 per household, compared with just 15 the year before – but 11 energy suppliers also went out of business.
And the cycle is starting all over again for 2019, as two energy suppliers have already ceased trading this year, and Eon has become the first energy supplier to announce it’ll be putting up its prices in response to Ofgem increasing the price cap.
Around 1.8 million Eon customers will be hit with a 10% price increase, meaning its standard tariff will be an eye-watering £286 more expensive than the cheapest deal on the market – reason enough to compare deals and switch supplier.
And now that one of the Big Six suppliers has blinked, you can be sure that more energy companies won’t be far behind - suppliers must give 30 days’ notice of price increases, meaning all are likely to announce rises sometime this month.
Update 12/02/19 - EDF becomes the second Big Six supplier to increase prices in as many days as it raises the price of its standard variable tariff (SVT) by 10%. The price hike will affect around 1.3 million households, who will now pay an average of £1,254 per year for gas and electricity.
Update 13/02/19 - Npower becomes the third Big Six supplier to increase prices in as many days as it raises the price of its standard variable tariff (SVT) by 10%. The price hike will affect around 1 million households, who will now pay an average of £1,254 per year for gas and electricity. Prepaymet customers will now pay £1,242 per year.
Update 19/02/19 - British Gas becomes the fourth Big Six supplier to increase prices in the last week. As of April 1st, the price of its standard variable tariff (SVT) will increase by 10%, affecting about 4 million households. The average cost of a British Gas SVT will now be £1,254 a year, up by £119. Prepayment customers also face a £107 (9%) price rise.
Update 19/02/19 - Scottish Power wastes no time in becoming the fifth Big Six supplier to increase prices, revealing a 10% rate rise on its SVT just hours after British Gas announcment. The average cost of a Scottish Power SVT will now be £1,254 a year, up by £117 - a rate rise that will affect around £900,000. Prepayment customers also face a £106 price rise.
Update 21/02/19 - SSE becomes the last of the Big Six to increase prices with a 10% rate rise on its SVT shceduled for April 1. The average cost of an SSE will now be £1,254 a year, up by £117. This rate rise will affect more than 2 million households.
Now that each of the big six have increased prices, this means a typical household on any of the Big Six's SVTs will be paying an average of £33 a year more than before the energy price cap kicked in, and £123 a year more than a year ago.
It's also worth noting that this rate of £1,254 is only for customers who pay by monthly Direct Debit. Anyone who pays on recipet of bill will pay a higher rate, and the price you pay for your energy is also dependent upon how much you use - even though prices are capped at a certain level, you will pay more if you use more than the average amount of energy, which Ofgem places at 12,000 kWh of gas and 3,100 kWh of electricity per year.
|Supplier||Old price||New price||Difference (£)||Difference (%)||Effective from|
|Ofgem price cap||£1,137||£1,254||£117||10.0%||April 2018|
|British Gas||£1,135||£1,254||£119||10.5%||April 2018|
|Scottish Power||£1,137||£1,254||£117||10.2%||April 2018|
But why are energy prices increasing with such regularity? And how can you beat the price hikes to help keep your energy bills as low as possible? Read on to find out.
An increase in wholesale costs appears to be main driver behind the price increases. 2018 saw a steady increase in wholesale prices, which culminated in suppliers paying 30% more for power and imposing price increases across the board. It looks like prices are on the way down though - a decrease in energy prices between December 2018 and January 2019 the first drop since 2017, the 8.5% reduction in consumer gas prices represented the biggest fall in three decades.
As things stand, the UK is tied to a centralised energy market, whereby power flows in one direction, from a small number of large generators to a large number of small consumers. We subsequently rely heavily on sources such as GB North Sea fields, Norway, and LNG interconnector flows and storage for our gas supply, and fossil fuels for our electricity supply.
This means the price that households pay for energy is directly tied to changes in the wholesale market and even world events - economic and political unrest in different regions have also played a role in pushing up oil prices over the past 18 months, as have other indirect factors, such as the increasing cost of transporting fuels to meet demand.
In turn, energy companies then pass these price hikes directly on to consumers, and so we get to a situation whereby households are struggling, energy suppliers are going out of business, and the government feels the need to intervene by imposing a price cap which, in itself, brings its own set of problems.
As more suppliers, local authorities, businesses and even households begin to generate their own energy through renewable sources, we should slowly move towards a decentralised energy market, whereby power flows both ways and consumers sell back any surplus to energy suppliers, as with the current feed-in tariff system. But until then, we’re at the mercy of the wholesale market, and things could get even worse when the UK leaves the EU.
The energy price cap was brought in with the best of intentions – to put an end to spiralling energy costs and control an increasingly volatile energy market – but it’s safe to say it really isn’t working.
96% say the #EnergyPriceCap isn't working, with over half agreeing that switching is the way to beat high #energy bills.— UKPower.co.uk (@ukpower) February 8, 2019
Thanks for voting ✅especially @theresa_may, who we assume took time out of her busy #Brexit schedule to cast the one vote that says the price cap is working. https://t.co/oNiP1QqGkZ
It was feared that, far from bringing prices down, the price cap would instead encourage suppliers to fix their prices around the level of the cap and actually reduce the level of competition in the energy market. And, sadly, this has proven to be the case – as the date of the price cap drew closer and more and more fixed rate deals ended, that the number of cheap energy deals costing less than £1,000 per year dropped by 90% - falling from 77 at the start of 2018 to just eight by the end the year.
And the fact that the cap is set to be increased by £117, just months after it was introduced, will have done nothing to help consumer confidence. It could simply be a case of semantics – the level of the cap is dependent upon the amount of energy each household uses, meaning the cap that Ofgem has introduced is actually more of a ‘rate cap’ than an actual ‘price cap’ – or even a lack of education, as many households don’t realise the cap won’t directly affect them unless they’re on a standard variable rate tariff.
Whatever the reason, the price cap isn’t working as it should be, and is pushing up prices for all energy consumers, whether directly or indirectly.
For more detailed information on what affects the price of energy, as well as a forecast for 2019 energy prices, check out our Energy Price Forecast.
Switching energy supplier remains the simplest and most effective way to make significant savings on the cost of your energy bills. It literally takes a few minutes to run a comparison, which will highlight exactly how much you could save by switching. And once you find a deal you like, we’ll take care of the rest and you’ll be switched to your new supplier within 17 days, which includes a 14-day cooling off period, during which time you can change your mind about switching.
To run an energy price comparison and see how much you could save, simply enter your postcode in the box at the top of the page.
When it comes to cutting your bills, switching energy supplier is only part of the story, and it pays to make your home more energy efficient. Improving energy efficiency can include anything from fitting double glazing, loft insulation and getting a new boiler, to turning the thermostat down a degree and switching off lights when not in use.
To find out more about boiler replacement, solar panels, home insulation and double glazing, go to our energy efficiency page, where you can also get free, no obligation quotes to help improve your home’s energy efficiency.
And for more energy saving tips, check out our energy saving advice page.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.