It’s been a long year for consumers and businesses, managing their finances and trying to keep things ‘ticking over’ whilst the country has been in a state of uncertainty. With lockdown restrictions completely phased out on July 18th – or ‘Freedom Day’ as it has come to be known – we have started to enjoy a glimmer of normality. Unfortunately, UK energy prices are set to rise again steeply as of October 2021, which means another hurdle for businesses to overcome is just around the corner.
Due to an unprecedented rise in the global gas prices, Ofgem have regrettably announced an increase in price cap of around 13% on the most commonly used energy tariffs – affecting both consumers and businesses across Britain. Wholesale gas and electricity prices have risen by 50% in the past six months alone, and so this increase in cost to the energy suppliers must be factored in to the price cap to ensure that companies are able to continue to supply their customers and meet their obligations.
Ofgem introduced a price cap in January 2019, with the intention of regulating and managing the maximum charges energy companies could pass on to their customers. Many consumers and businesses choose an energy supplier and infrequently switch or monitor their charges and statements. Once their initial energy agreement comes to an end they get rolled over on to a much higher tariff that doesn’t represent good or fair value for money. The price caps protect these consumers from overcharges and exploitation.
The price cap is reviewed and adjusted twice each year to reflect the state of the energy market at that time. Wholesale energy prices fell last summer when lockdown ended and Ofgem reflected this in the price cap, reducing it by £84. This saving came at the perfect time for consumers, keeping costs low over the winter and during the period of higher energy usage.
The price cap was last reviewed in February 2021, but since then gas prices have doubled. Low stock of natural gas, supply issues, the buying power of international markets, and other factors have all contributed to the wholesale cost increase, and in turn, the price cap increase. As of 1st October 2021, households can expect to see an increase of around £150 on their energy bills.
There is never a good time for energy prices to rise, but going into the colder months after the challenging year business and consumers have faced makes this increase a tough pill to swallow. The extra aid to Universal Credit has been removed and the furlough scheme ends in autumn, putting extra financial strain on businesses and households.
Please remember though – support is available for those feeling the pressure of rising energy prices. Now is a great time to shop around for a new energy deal for your home or business, and locking in low prices over a fixed period will give you some cost certainty and help you avoid the financial impact of energy market volatility.
Pensioners and low-income households can use the Warm Home Discount to access a £40 rebate on their energy bills, which would help offset the cost of this pending price increase. And if you’re struggling with paying your energy bills then we encourage you to reach out directly to your gas and electricity suppliers. They have lots of support systems in place to make the cost of energy more manageable.
Businesses can also take additional steps to help offset this rise in prices by looking at smarter ways to purchase gas, electricity and water, and reduce their energy consumption. A specialist business energy broker like Enexus can help you optimise the way your business purchases, generates and consumes energy. Our experienced energy procurement experts work on your behalf to leverage the best prices and contracts the market has to offer. Get in touch to find out how we can help you mitigate rising business energy costs.