First it was Brexit. Then it was Covid. Life in the UK seems to be one crisis after another these days. The current energy crisis is a bit different – we won’t be locked down at home for months on end – but there are still plenty of furrowed brows at Westminster.
You’d be forgiven for feeling pretty nervous yourself, too. The last thing we all need is sky-high energy prices this winter. So what’s going on? And where will it end? We answer all your questions below.
What’s the problem?
The price of wholesale energy has gone through the roof in recent weeks. It’s because demand from Asia is soaring, there’s less gas coming into Europe, and the Russians (who produce a lot of gas themselves) don’t seem particularly keen to help us out. Funny that.
The real problem, however, is that the UK is in a particularly vulnerable position. Most of our electricity is generated via gas (even though we don’t have large storage facilities) and we’ve suffered several setbacks in recent weeks: nuclear power plants are undergoing maintenance, there’s been very little wind to harness from our turbines, plus a big electricity cable that comes across the Channel from France has been damaged by fire. Merde!
What does this mean for your energy bills?
There’s no sugar coating this one, sadly. Your bills are likely to go up. Wholesale prices have risen 455% over the last year. In fact, they went up 13% on Monday alone*. It’s therefore inevitable that some of these costs will be passed on to the consumer. Indeed, prices are sure to go up as soon as 1 October.
What’s more, the usual strategy for dealing with high energy prices – switching suppliers - normally does the trick, but this is difficult at the moment. The price comparison sites are either struggling to find consumers attractive fixed-price contracts or have stopped trying altogether. Everyone’s waiting to see what happens.
Can the government help?
It’s complicated. The government caps the amount energy suppliers can charge in order to protect consumers. The problem, however, is that the cap can only be reviewed twice every year. And it can only go up 12.5% each time.
The energy companies are in a pickle as a result. They’re losing money quickly and many of the smaller ones are folding. In fact, some predict that as many as 60 of the UK’s 70 energy companies may have collapsed by spring. Yikes.
Consequently, the main suppliers want the government to scrap the cap altogether. The government has promised to protect consumers by keeping the cap for now but it’s a delicate situation. After all, Boris won’t want to bail out failing companies either.
So what should you do?
Your options are really rather limited, unfortunately. If you are on an existing fixed term tariff, which you signed up to earlier this year, our advice is to stay put until the end of your agreement. You could be on to a good thing. If you’re one of the 11 million households that’s on a Standard Variable Tariff (SVT), however, then you’ve got a tricky call to make.
Before the current pricing crunch, SVT’s were often expensive because suppliers could alter the tariff whenever they liked (as long as they gave 30 days’ notice). But these default deals are now amongst the most competitive available because suppliers don’t want to offer fixed-price contracts at low rates while wholesale prices are going through the roof.
Having said that, if you stick with your SVT then brace yourself for a sharp price rise in April next year when the cap is reviewed. There’s also a risk that the government might bring this date forward if suppliers are going to the wall left, right, and centre.
So is it worth staying where you are or seeking out a new multi-year fixed tariff? Our advice would be to see what’s out there before taking the plunge. Look for one of the few multi-year fixed term tariffs being offered by a handful of companies, such as Octopus Energy. Whilst this might be slightly more expensive than a SVT at the moment, it would protect you against outrageous price hikes in the future.
What happens if your supplier goes bust?
Don’t worry. The government seems to have this one covered. 1.5 million customers have already lost their provider but their energy supply hasn’t been interrupted. Ofgem is advising customers to stay put while they find them another provider automatically. For example, People’s Energy customers have been switched to British Gas.
Although it’s possible that a new provider will charge you slightly more, especially if you’re put on a special ‘deemed’ contract, Ofgem have promised to find displaced customers the best deal possible. Furthermore, if you’re in credit with your old supplier, this will be transferred across so you don’t miss out. You can also shop around and switch suppliers (if you want to) at a later date without being charged exit fees.
How does this impact Just Move In?
Fortunately, although energy prices are rising, we’re still able to offer our customers competitive long-term, fixed price energy deals when they move with us. Locking into a tariff like this might involve paying slightly more than an SVT tariff, but switching to an award-winning company - like those on our panel - should reassure you that your supplier isn’t ‘going anywhere’ soon. You’ll also be protected from medium to long-term market volatility.
If we previously switched you to a green energy supplier that’s now unfortunately stopped trading, such as People’s Energy, please rest assured that Ofgem will protect you. All People’s Energy customers have already been moved to British Gas. You won’t experience any interruptions if you’re transferred to another provider.
Here's some comforting words from Tom Old, our Co-Founder:
“Unfortunately we expect to see further price increases over the next two years and the energy market to go through a significant reset. During this period, we will continue to do our very best to help customers at the point of moving home, by providing recommendations and reassurance about an industry lots of people find daunting and complicated.”
So don’t worry. We’ve got your back until this crisis blows over. And the UK won’t run out of gas or anything like that. It’s just going to cost more for a little while. You won’t have to venture into the woods in search of firewood just yet, we promise.
*figures accurate as of 21 September 2021