Energy suppliers are nothing if not predictable – no sooner have we all had to crank up the heating to stave off the so-called ‘Beast from the East’, than there’s talk of a new round of energy price hikes.
It seems a combination of supply shortages and an increase in wholesale costs are to blame, but it’s not entirely clear when, or by how much, prices will rise.
A new round of price rises was first mooted last week, as a high gas demand for heating, coupled with a series disruptions to supply, meant National Grid had to issue a rare ‘gas deficit warning’ to urgently call for more supplies and ask industry to volunteer to use less.
This shortage in supply also brought with it the possibility that National Grid might even have to impose a compulsorily cut off of industrial users’ gas supplies, to help to preserve provisions for households.
It’s a situation that has seen wholesale gas prices peak at four times their usual level, surging as high as 225p per therm last week, compared with an average of 56p per therm throughout February. And because much of the UK’s electricity supply is generated by gas-fired power plants, there’s also been a surge in wholesale electricity prices.
Suppliers are now under pressure to increase prices for consumers to help mitigate for this increase in wholesale costs – another blow for even more UK households, just weeks after Ofgem announced five million vulnerable households are to be hit with a 5.5% price hike on their annual energy bills.
As things stand, only one supplier has passed on the wholesale price increase to its customers – Bulb Energy is increasing its dual fuel tariff by 2.7%, meaning around 3,000 households will see their combined gas and electricity bill rise from £855 to £879 a year.
Bulb Energy has said its price hike would have been nearer the 7.5% mark, but for measures it’s implemented to legislate for such increases, and industry experts are warning us to brace ourselves for price rises of anything up to 9%, which would add around £100 to the average Big Six standard variable tariff of £1,135.which
When one energy supplier increases prices, the others usually follow suit shortly after, so don’t be surprised to see some of the bigger energy companies putting up their prices during the coming months, mirroring the wave of price hikes imposed around this time last year.
Although the old saying goes that death and taxes are the only certainty in life, we may as well add energy price rises to the list, as prices go up without fail, year-on-year (admittedly, this would make the trope a lot less catchy, but still…)
The good news is there is an easy way to protect yourself from the annual price hikes, and that’s by signing up for a fixed rate tariff to lock in the price you pay for the energy you use.
Prices are usually fixed for between 12 and 18 months, and although your bills will still vary depending upon the amount of gas and electricity you use, the price you pay per unit of energy you use will remain the same for the duration of the deal, regardless of how much suppliers push their prices up by.
The freezing temperatures may have delayed any price hike announcements – putting prices up during a cold snap doesn’t make for great PR – as may have the ongoing parliamentary processes to introduce an energy price cap by next winter.
But it’s almost certain that prices will go up across the board in the coming weeks or months, so it makes sense to nail down your prices with a fixed-rate deal now.
Check out Everything you need to know about fixed rate energy tariffs for more information, and to see the best fixed rate deals on the market, or enter your postcode at the top of this page to run an energy comparison and see how much you could save on you annual bills.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.