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UK energy crisis - gas and electricity

22-02-16 14:55

It has been brought to everybody’s attention over the last couple of weeks that energy prices in the UK will rise an astronomical amount starting from 1st April 2022.
From 1st April 2022, it is estimated that the average increase of energy prices for people on standard tariffs will be as much as 54%. This is estimated to affect 22 million households in the UK that are still on standard tariffs.
Why are the prices rising so much?

The Wholesale gas prices are 4 times greater than they were this time last year which has caused Ofgem to increase the price cap.

Ofgem is responsible for the price cap on the energy industry which limits how much they can charge consumers. The price cap is reviewed by Ofgem every 6 months. However, this can sound quite misleading, as there isn’t a “cap” that can be placed on how much consumers pay for gas and electricity, it is more so a cap on how much can be charged per unit of gas and electricity. The more you use, the more you will pay.#
Although the UK seems to have been hit quite harshly with rising prices, it is actually a global issue. Worldwide demand for energy supplies has increased immensely over the last few years due to several factors.

A cold winter in Europe in 2020/2021 meant that more people turned on their heating and so stored gas supplies were low.
The Sumer of 2020/2021 was relatively windless which resulted in less wind energy being generated, however, this form of energy isn’t as big of a source as others.

There has been a huge demand for liquefied natural gas supplied from Asia - mainly China.

The reason that the UK has been affected so drastically is that around 85% of UK homes use gas central heating and 1/3 of electricity is generated by gas.

When the wholesale gas prices began to rise last year, it was responsible for 29 energy suppliers going bust which affected around 2 million homes in the UK. These households were then moved to new suppliers which has higher tariffs.

What can I do to lessen the sting of rising energy prices?

There is support being put in place by the government to help people affected by the rising costs. Chancellor, Rishi Sunak announced that consumers can receive a £200 discount on their bill this year, but this will be paid back over time. The £200 discount will be paid back at £40 a year for 5 years starting from April 2023. Sunak also confirmed that there will be a £150 council tax rebate in April for households in council tax bands A to D. The more expensive the home is that you currently live in, the higher the band you are in however, around 80% of households are in bands A to D.

There are further measures to be put in place to help more vulnerable households from being so greatly affected by the rise in energy bills.
There are of course some improvements that you could make in your home such as having your home insulated and making sure that any cracks and places that draughts could get in are covered which would reduce the need to use central heating. You could also switch to energy-saving lightbulbs and ensure that lights and electrical appliances are properly switched off when not being used. 

Editorial Disclaimer: This article was updated on 16.02.2022
Opinions expressed here are the author's alone, and not those of any bank, credit card issuer or any other company. This article has not been reviewed, approved, or otherwise endorsed by any of these organisations. NB: The information on this page does not constitute financial advice, please do your own research to ensure that the product/service is right for your individual circumstances.