Why is there an energy crisis in the UK?

With energy bills set to skyrocket by £693 per household, finding the best provider deal is more important than ever

Thousands of people in Britain are turning to price comparison sites in a bid to find better deals as the economic climate puts an unprecedented strain on finances in 2022. 

With the price of living projected to skyrocket this year, finding a way to reduce costs has become an essential task for people across the country. 

Electricity and gas bills will increase by 54% – £693 a year – in April when the energy price cap increases, coupled with inflation rates reaching their highest levels for 30 years (forecasts suggest they will hit 7% by spring). 

Why the energy crisis is affecting the UK

In 2021, gas supply struggled as plummeting demand was immediately followed by record demand. International shortages were the result, pushing up prices for businesses and driving inflation across business sectors.

The UK market has been severely affected by the global energy crisis for a number of reasons. Relatively low gas storage, an over-reliance on wind power during a time of unseasonably low wind and recent government energy policy have combined to create a perfect storm in the domestic energy sector.

Gas price rises have ultimately forced energy companies to spend more, and these extra costs have now been passed along to the customer. 

Homeowners and businesses are now exploring alternative energy options, leading to the likes of Free Price Compare – one of the UK’s longest-running and most trusted online comparison services – experiencing a huge surge in demand. 

Shay Ramani, spokesperson for Free Price Compare, stated: “UK consumers are already being affected with high inflation and food prices going up and now an additional squeeze of £693 on household energy bills. 

 

“It is essential for UK households to be energy savvy and compare energy prices to save money.” 

What is the energy price cap? 

The energy price cap – which was set up to prevent consumers being charged too much by energy companies – has had to be increased to prevent more firms going bust, sector regulator Ofgem has stated.

Originally introduced in January 2019, the energy price cap was brought into law in the summer of 2021 but has had unintended consequences. Limiting the amount suppliers can charge, coupled with sharply increasing prices, has locked smaller energy providers into contracts where they were providing energy at an unexpected loss. 

23 energy suppliers in the UK have gone bust since mid-2021, with more than four million consumers displaced to new energy suppliers under the Supplier of Last Resort (SoLR) process. 

The energy price cap doesn’t apply to small businesses – meaning these organisations may experience much larger bill increases. According to Gazprom Energy, some of the most energy-intensive businesses* that could be worst-affected include:

  • Chemical manufacturing – 3,502 ktoe
  • Food, drink and tobacco manufacturing – 2,967 ktoe
  • Mineral products manufacturing – 2,582 ktoe
  • Mineral products manufacturing – 2,582 ktoe
  • Printing and publishing – 1,831 ktoe
  • Agriculture – 1,505 ktoe
  • Mechanical engineering – 1,513 ktoe
  • Iron, steel and metal manufacturing – 1,497 ktoe

*All estimates are given in ‘kilotonne of oil equivalent’ (ktoe).

How can people save money on energy bills? 

Customers will be able to compare suppliers and switch to more competitive tariffs at the end of February. 

At the time of writing, the remaining energy suppliers are:

  • British Gas
  • EDF
  • Eon
  • Ovo
  • Octopus Energy
  • SSE
  • Shell Energy
  • Scottish Power

Penalty charges for exiting an agreement may still apply, with all customers advised to check contract terms before pursuing a switch. 

Should you switch to a Fixed Energy Tariff?

At the moment, no.

Fixed Energy Tariffs are likely to be a much more expensive option than a SVT (Standard Variable Tariff). You don’t have to switch to a fixed tariff, provided a supplier can offer a SVT, despite what some energy advisors may tell you over the phone. 

If you’re already on a Fixed Energy Tariff, it’s advisable to contact the supplier directly and see if it’s possible to switch to a SVT. 

Should you be unable to resolve the issue within six weeks, you can raise a complaint with the Energy Ombudsman – an Ofgem-approved institution responsible for handling energy related disputes.

What happens next? 

According to some experts, there may be more scope for energy suppliers to price more competitively against standard energy tariffs as the current wholesale market begins to stabilise. 

Keeping an eye on the energy landscape remains essential. In a turbulent climate, Free Price Comparison is offering people the vital help and guidance they need – not just through its price comparison tool but also via insightful energy guides

With costs continuing to rise – the best response for both consumers and business owners is to switch providers in March 2022. People can do that at Free Price Compare – a platform which makes it easier than ever to find the best energy deals across the UK. 

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