Today’s news of skyrocketing gas prices and potential utility bankruptcy is kind of scary, isn’t it? Let me explain what happens, how it affects your energy bills, and what you can do to soften the blow …
We just can’t take a break, can we? Just when we thought the worst of the pandemic was behind us and we could get back to normal, another crisis comes to frighten us the Bejeezus.
So what is it this time? An estimated 60% increase in wholesale gas and electricity prices, that’s it. We expect our energy bills to rise by an average of £ 280 in the coming weeks, with several utilities on the verge of collapse.
It’s a global thing
The reasons for this are complex and long-term. We are seeing a weak gas pipeline from Europe, especially Russia, partly because countries have not stocked up on supplies as much as they should after an unusually long winter, and partly because of complex geopolitical issues. Russia could use gas as a lever to start a controversial new pipeline called Nord Stream 2, but there are other tech-savvy theories about why Russian gas is hard to come by – in other words, this is a Europe-wide problem, and not an isolated one to Great Britain.
Also, we have a real global shortage of tankers after the demand for goods for Covid suddenly increased. If tankers are expensive and difficult to come by, that’s a bit of a problem when we rely on tankers to transport gas in liquefied form.
BUT … we’ve turned a few things upside down in the UK.
Britain out of order
For example, we don’t have any major gas storage facilities after we closed our last one in 2017. Oh, and great timing with the fire at a substation in Kent last week that caused a so-called “interconnector” to fail. can supply enough electricity (mostly generated from French nuclear power plants) for 1.4 million households. This vital energy supply could be out of order until MARCH, possibly longer.
And not even our lousy British weather will reliably help us – we haven’t had enough wind lately to make up for that. Come on mother nature, read the room.
All of this helps explain why Compare the Market has shut down its energy exchange service and people looking for new tariffs are unlikely to get yesterday’s sensationally cheap deals. It turned out that all of this competition in the energy market wasn’t that good after all, as it has encouraged a number of companies to come into play with no resilient business models and promise rock bottom tariffs that were, in fact, too good to be true.
Wait a minute, why are utilities so surprised by this? Surely your whole job is to … provide energy?!? Well, most of the small utility companies that have flooded the market in recent years may look like great value compared to Big Bad 6, but they don’t buy their electricity upfront – and operate with margins so fine that any disruption like this means that they have to go broken.
Therefore, the BBC reckons that there could be only 10 utilities by the end of the year, compared to 70 at the beginning of the year. This means that many customers are relocated to new so-called “providers of last resort”, where they pay for new “agreed” tariffs. Ofgem says they will try to make sure people get a good deal, but I wouldn’t dump my hat on it. Chances are, if your current provider goes broke, you will soon be paying more.
And unfortunately, it is not only our gas and Leccia prices that are affected. This is forcing important businesses to close, including fertilizer factories that give us CO2. This is very important when slaughtering animals and food packaging, so farmers are now warning of bottlenecks. We resorted to lighting coal – ironically, as Boris Johnson is currently in the states to speak to leaders about the transition from coal!
What you can do
If your provider goes bust, make sure you provide accurate meter readings for your new provider as soon as possible. Then ask for the cheapest tariff. Don’t look anywhere else just see if it is competitive in the market. You can then look for a better deal without paying any exit fees. The entire change process should take around 16-18 days.
But be warned. Base tariffs are becoming more expensive. So make sure you follow these basic steps:
- Check offers based on usage, not house size
- Pay by direct debit, not via a prepayment counter or when you receive the invoice
- Think of fixed instead of variable tariffs
- go paperless if you can.