There are a number of reasons behind the increase in energy prices in the UK. Some of them include the fluctuation in supply and demand, wholesale costs, availability, infrastructure maintenance, and transport costs. Even the aftereffects of a conflict or natural disaster in an oil-rich country can affect the production and availability of energy in the UK, and hence the prices.
What changes have energy prices seen over the last year?
According to the survey conducted by Compare The Market, the prices of gas have gone up by 221% over the last 20 years, and for electricity, prices inflated by 193% over the same time period.
Just like every other sector out there, the Coronavirus pandemic has drastically impacted the energy market in the UK in 2020. Amidst several other financial fallouts, many households were using increased amounts of electricity and gas due to the country-wide lockdowns. This had led to a 40% increase in the arrears on the energy bills.
What can we expect from 2021 in terms of energy?
As we enter into 2021, the government has announced the lockdown up until mid-February. Hence, it is expected that energy consumption in the UK will continue to climb, giving air to the rise in the prices of electricity and gas.
Energy regulator in the UK called Ofgem had introduced price caps in January 2019, in an attempt to reduce costs for households across the country. The price caps are reviewed twice a year, and the next one is due in March 2021. Ofgem is considering increasing the price cap on household bills by 21 pounds. This is being done to support the energy companies who were facing a loss due to the ongoing pandemic and the rise in unpaid bills.
This news had gotten backlash from campaigners, who questioned the logic of increasing the price caps while the householders were struggling to pay the utility bills. A 21 pounds increase to 1063 pounds; the price cap is based on the average usage of electricity and gas in the UK.
Cat Hobbs, the CEO of We Own It, an organization that advocates the nationalization of energy supply, said that the proposals given by Ofgem pertaining to price caps are quite shocking. According to him, when people are already struggling to pay their bills, increasing the price cap further is just farcical.
What’s the best way to deal with increasing energy prices?
Given the increase in prices, especially during the winters, switching to deals has become a common practice. According to Energy UK, a trading company, around 5.5 million people switched suppliers for electricity alone during 2020.
The process of switching to a cheap energy deal or supplier in UK takes no more than 21 days and it usually happens seamlessly with no interruptions, unless you decide to upgrade your meter because that is when the engineer may have to switch off the supply for approximately an hour.
Given that the energy prices in the UK are increasing due to increased demand, the practice of switching deals is becoming a norm. In order to ensure that you choose a superior deal that is cost-effective, it is important that you understand your bill. The more you understand your current bill, the better. To start off, you should go over the last few bills to get an idea of the average figure of what you been paying overtime.
The bill provides you with the name of your current energy supplier in addition to the name of your energy tariff. The annual summary or statement also gives you an idea of how much electricity and gas you use, usually mentioned in Kilowatts per hour (kWh).
With this data and some personal information like your postal code and type of building you reside in, you can efficiently compare various energy deals, and choose the one that can help you save money. Comparison tools online come in handy to make the whole process easier and find the most competitive tariff.
After finding the tariff that fits you the best, it is important that you go over the terms and conditions. This would help you take note of any exit fee that is attached to the contract. It is the fee that you must pay in case you decide to make a switch to a different deal before the contract ends.
You shouldn’t be paying the exit fee if your supplier does not send you the notice before your contract ends or you decide on switching to a new plan 42 days prior to the end of the contract.
“Octopus” was awarded as the supplier of the year 2020, and has been known for offering prices to all of its customers. An interesting thing to note is the difference between their standard and fixed price was less than 1%.
In addition to that, their customer service has been great over the last year as they have answered calls within 2 minutes on average. Lastly, they take great pride in providing 100% green energy. All of their energy comes from renewable resources such as the sun, wind, and water.
Suppliers like these offer great value to their customers and the energy deals they have to offer can provide you with cost-effective packages amidst the increasing energy prices in the UK. However, it is important that you realize the number of suppliers available and that the types of deals that you can make use of, differs from area to area.
Conclusively, the prices have been increasing due to the ongoing pandemic, and the higher price cap by Ofgem has put a further strain on the householders as they hustle to pay their utility bills. Switching to cheaper energy deals can help you save some money off the bills, and the comparison tools available online can assist you through the process.
Going for a debit direct payment method and a dual fuel deal – an energy deal through which you can procure both gas and electricity from one supplier – can be one way to go. This is so because suppliers tend to offer discounts in the form of cash backs and vouchers, which can help you relax a bit amidst the price hikes. Similarly, when you start looking you’ll find many different deals that cater to your energy needs specifically.