Energy Price Cap 2022 Update
The UK energy price cap is increased by 54% in April 2022 and is expected to increase again in October.
In 2021, half of all the energy suppliers in the UK went bust. This statistic follows months and months of issues in the energy sector. A host of environmental, technical, and political factors have contributed to increasing UK energy bills. Domestic energy customers in the UK are experiencing this domino effect first-hand.
With prices still rising and the energy cap review fast approaching, lots of home energy customers are wondering whether electricity and gas prices are still going up.
In fact, in February 2022 Ofgem announced energy bills will rise by a typical £693/year for 22 million households in April 2022.
Gas and electricity prices in the UK rose by around 250% in 2021. There are lots of reasons why this massive rise took place. The UK experienced an extremely cold winter in 2020, which depleted our gas stocks. A very mild, low-wind summer followed in 2021, which impacted the amount of renewable energy that the UK generated.
There was an increasing demand for energy in Asia which depleted stocks across the board. Meanwhile, Russia produced far less energy than expected. The long-awaited Nord Stream 2 pipeline, which aims to double Russia’s ability to send gas to Germany, is still blocked by political discourse. Russia refuses to send more than the pre-agreed amount of gas to the rest of Europe to help with the energy crisis.
Major structural damages have seriously impacted our ability to create and store energy. The UK depends on imported gas. In fact, half of the UK’s gas supply is imported. A major power cable that imports electricity from France was fire damaged. This increased our dependence on gas-fired plants, which produce around half of all the gas in the UK. The plants also suffered damages due to unplanned maintenance outages.
Many more people are working from home due to the COVID-19 pandemic. The transition to hybrid and in some cases remote working has seen an increase in energy usage.
Any one of these problems has the power to impact the energy landscape. Ultimately, global warming has caused extreme weather conditions that countries across Europe are not equipped to handle. This, and the knock-on effect of all the other factors, has caused an energy crisis.
Yes, in April 2022 Ofgem are increasing the UK energy price cap on standard and default tariffs by 54%.
This means UK households will see energy bills rise by £693/year on average.
Wholesale market prices are still increasing.
Wholesale prices only impact home energy consumers who are on standard packages. Homeowners who have signed contracts for fixed tariffs do not have to worry about energy prices. Some standard variable tariffs (SVTs) are also exempt from the cap, but these agreements are rare.
If you do not ask for a specific plan, your supplier will automatically put you on a standard variable tariff. They are often referred to as the most expensive kind of tariff. Unlike other tariffs, standard variable tariffs are indefinite. If you do not switch to a different type of tariff, you will be on a standard tariff forever.
Homeowners on this kind of tariff can expect unit prices that reflect wholesale energy costs. The good news is that people on this kind of tariff are protected by a cap. In October of 2021, the government announced a new energy price cap. Home energy customers who have standard variable tariffs can only pay a maximum of £1,277 each year. This cap, which is designed to minimise the impact of inflated wholesale energy prices, is still a 12% increase from the last energy price cap.
Ofgem, the government body that regulates the energy sector, reviews the price cap every six months. The next review is scheduled for February, and changes will be implemented from the 1st of April onwards.
An energy sector specialist called Cornwall Insights has published worrying predictions for the next energy cap review. They predict a rise of 46% for the summer of 2022 and just under 50% for the Winter of 2022. The energy price cap could rise above £2,000 per year. Typical default home energy customers could spend an astounding £1,865 per year on their UK energy bills. Ofgem are trying to come up with answers to please both energy companies and protect consumers from rising wholesale energy costs; a fine line that is becoming increasingly difficult to walk.
With the price cap review looming, lots of domestic consumers are wondering what they can do to avoid high energy prices. Before the energy crisis, home energy customers could save money by switching to a different tariff.
Avoiding the crises is simply impossible. At this point it is about damage limitation. UK households should look at ways to reduce their energy usage as switching energy supplier is only worth it in some select situations.
For example, Ofgem has announces there will be a 54% increase on the energy price cap in April 2022.
If you can find any energy deals with a 40-50% increase on your current energy deal; it could be worth switching energy suppliers to save yourself from spiralling gas and electricity prices.
Fixed-rate tariffs used to be an excellent option for people who wanted to lock in a unit rate. Customers on this kind of tariff are not guaranteed consistent bills. If they use more energy from one month to the next, they will get a larger bill. The main benefit of this kind of tariff is that it offers definite unit rates.
It is worth using an energy comparison generator to see what other tariffs are available, but you should be aware of the pitfalls of fixed-rate tariffs in the current energy market.
There are a few things that domestic customers can do to reduce their UK energy bills. The main thing is to increase your homes energy efficiency and bring down your overall spend. Here are some easy ways you can increase energy efficiency.
Of course, not all home energy customers can afford a lump sum payments. There are other options available to people who want to take small steps to reduce their energy bills. Turning unnecessary appliances off and wearing layers might seem like standard advice, but small changes can impact your overall UK energy bills.
The energy crisis impacts consumers all over Europe. Experts are quick to say that it will not end in 2022. Energy expert Mark Bennett says that ‘we are still in the middle of this market volatility.’ As energy prices continue to trend upwards in the UK, energy leaders in Europe are working as hard as possible to combat the energy shortage. China has intervened in the global coal markets, and political pressure is being put on Russia to boost gas supplies to Europe.
Finding the cheapest energy supplier has maybe become a thing of the past, at least for the foreseeable. Many customers are now compare energy prices to beat the price cap and make energy savings on their renewal. The home energy market has become a little more complicated as a more strategic approach is required when consumers are looking to switch energy supplier.
Switching tariffs can still be the most effective way to save a lump sum on your UK energy bills. Home energy customers can easily switch suppliers with our energy comparison generator. Put your details into our generator and get a list of suitable suppliers and tariffs in just 60 seconds. It really is that simple. We will even do all the leg work. When you compare energy deals using our engine, we handle all of the admin and communication with both your old and new energy supplier.
With our comparison generator, it has never been easier to find the best deals on the market. Finding a fixed-rate tariff might be just what you need to avoid the upcoming cap increase. If you can find a fixed tariff that promises lower rates than those predicted for the next cap review, you could save money in the long term.