Today’s news about rocketing gas prices and energy providers potentially going bust is kinda scary, right? Let me explain what’s happening, how it will affect your energy bills and what you can do to soften the blow…
We just can’t catch a break, can we? Just when we thought the worst of the pandemic was behind us, and we could start getting back to “normal”, a new crisis comes along to scare the bejeezus out of us.
So what is it this time? An estimated 60% increase in wholesale gas and electricity prices, that’s what. We’re looking at an average increase of £280 in our energy bills over the coming weeks, with several energy providers on the brink of collapse.
It’s a global thang
The reasons behind this are complex and long-standing. We’re seeing a weak pipeline of gas from Europe, particularly from Russia, partly because countries haven’t been stocking up on supplies as much as they should after an unusually long winter and partly due to complex geopolitical stuff. Russia might be using gas as a leverage to kickstart a controversial new pipeline called Nord Stream 2, but there are other techy theories as to why Russian gas is proving hard to get – in other words, this is a Europe-wide problem and not unique to the UK.
Plus, we have a real worldwide shortage of shipping tankers following a sudden uptick in demand for goods post-Covid. If tankers are expensive and hard to get hold of, that’s ever so slightly problematic when we rely on gas to be transported in tankers in liquefied form.
BUT…we have ballsed a few things up in the UK.
UK not OK
For instance, we don’t have any major gas storage facilities, having shut our last one in 2017. Oh and great timing with that fire at a national grid substation in Kent last week, which has knocked out a so-called “interconnector” capable of providing enough electricity (mostly generated from French nuclear plants) for 1.4m homes. This vital supply of power could be out of action until MARCH, possibly longer.
And not even our crappy British weather can be relied upon to help us out – we haven’t been producing enough wind recently for that to kick in as a substitute. C’mon Mother Nature, read the room.
All this helps to explain why Compare the Market has suspended its energy switching service, and folks looking for new tariffs are unlikely to get the sensationally cheap deals of yesteryear. It turns out all this competition in the energy market hasn’t been such a good thing after all, as it has encouraged a bunch of companies to come into the game without resilient business models, promising rock bottom tariffs that were indeed too good to be true.
Gas-holes?
Hang on, why have energy providers been so caught out by this? Surely their whole job is to…provide energy?!? Well, most small energy providers that have flooded the market in recent years may look like great value compared to the Big Bad 6 but they don’t pre-buy their power – and operate on such fine margins that any disruption like this means they go kaput.
So that’s why the BBC reckons there could be just 10 energy providers left by the end of the year, compared to 70 at the start of it. That means loads of customers being shifted to new so-called “providers of last resort”, where they’ll be paying for new “deemed” tariffs. Ofgem says they will try to ensure people get a good deal but I wouldn’t hang my hat on that. Chances are you WILL soon be paying more if your current provider goes bust soon.
And unfortunately, it’s NOT just our gas and leccy prices that are affected. This is forcing important businesses to close, including fertiliser plants that give us CO2. This is really important for slaughtering animals and food packaging, so that’s why farmers are warning of shortages now. We’ve resorted to firing up coal – ironic, given Boris Johnson is currently stateside to talk to world leaders about transitioning away from coal!
What YOU can do
If your provider goes bust, make sure you provide accurate meter readings for your new provider ASAP. Then ask to be put on their cheapest tariff. Don’t look elsewhere just yet, but check if it’s competitive in the market. You can then shop around for a better deal without paying exit fees. The whole switching process should take around 16 – 18 days.
But be warned. Baseline tariffs WILL be more pricey. So make sure you follow these basic steps:
- check deals by usage not house size
- pay by direct debit not through prepayment meters or when you receive bills
- think about fixed rather than variable tariffs
- go paperless if you can.
