How To Deal With Rising Energy Prices

By Leeds Credit Union

You've probably heard that the price of wholesale gas has risen by a staggering 70% since August, resulting in several energy suppliers going out of business and production halting at some sites. So what's behind the price hike and what should you do if your supplier has gone under? We've got the answers to this and several other questions.

Why have gas prices soared?

One of the main reasons for the price increase is that demand for gas is rising as the world re-emerges from months of lockdown. Another key reason is the time of year - when Europe starts heading towards winter, the demand for gas rises sharply, especially in the UK, which relies heavily on gas to heat homes.

Throw in supply issues from Russia, several gas platforms in the North Sea closing to carry out maintenance that was postponed by Covid-19 and the need to use more gas than usual to produce electricity due to technical issues and you've got a perfect storm of problems.

What does this mean for my energy bills?

Although it depends what kind of deal you're on, they're almost certainly going to rise.

Because of a hike in the energy price cap - which helps control the cost of gas and electricity in the UK by limiting the rates charged by suppliers - prices were already going to rise for households in Britain that are on their supplier's default tariff. The rise will come into force on October 1st. 

Predicting how much your bills might rise is difficult but the Office of Gas and Electricity Markets (Ofgem) expects an average price rise of £135 per household this winter, so you should factor that additional expenditure into your financial planning now.

Why are energy suppliers going out of business?

Because they are running at a loss. 

When you sign a fixed-term deal with a gas company, you are agreeing to pay the same amount for any gas and electricity you use for the duration of the deal. However, because gas prices have risen so high, the companies are now selling gas for less than they are paying for it and losing money as a result.

What should I do if my energy supplier goes bust?

The good news is that Ofgem is obliged to automatically move you to a new supplier, so you don't need to do anything. This might take a few weeks but your new supplier will contact you once everything is in place and you can continue to use gas and electricity as normal in the meantime. If you were in credit with your old supplier, that money is safe and you should get it back in due course.

To ensure you don't get overcharged during your transition period, it is worth taking pictures of your meters and downloading or printing out your bills from your previous supplier. If Ofgem moves you to a supplier or a deal you're unhappy with, you're free to shop around for a better offer.

What else can I do?

Unfortunately, it seems inevitable that those on lower incomes will be hardest hit by the price rise, especially at a time when the universal credit uplift is coming to an end and furlough and self-employment support is ending.

Fortunately, your energy supply won't be cut off as disconnections have been suspended, while prepayment customers can get emergency credit if they're struggling to make ends meet. 

From October 18th, you can apply for the Warm Home Discount - a one-off payment of £140 to help towards the cost of energy bills. Find out if you're eligible here.

Of course, every household is different so it's also worth doing some research into the different rates being charged by the remaining energy companies. You can find out all you need to know about comparing and switching energy suppliers here.

Leeds Credit Union can help too

With loans from £250 to £20,000 available, we can help ensure the energy price crisis doesn't cause you any sleepless nights. We can help you make your home more energy efficient by helping you to purchase items such an energy efficient boiler or solar panels.  Apply for one of our affordable loans here.