by Ida Kalinic, volunteer content creator
In August this year, Ofgem announced it will be increasing the energy price cap for customers on a default energy tariff, standard credit, and a prepayment meter. Customers on fixed tariffs won’t be affected by the increase for the duration of their contract.
The regulator explained this is due to a global increase in electricity and gas prices, which are now at their all-time high.
Why are electricity and gas prices increasing?
There are many factors that have caused this increase. There has been a post-pandemic surge in fossil fuel energy demand as renewable energy supply has suffered because of changes in weather patterns. However, gas stockpiles are at their lowest in ten years, as reported by Money Week, due to particularly cold winter and hot summer in Europe.
Meanwhile, multiple factors have hindered energy production and supply, such as unusually dry weather in Brazil causing lower supply from their hydroelectric dams or wind speeds dropping dramatically over the summer, cutting energy production from wind turbines.
Russia has also lowered its gas supply to Europe due to higher domestic demand. The European Commission has also been reducing the supply of carbon credits that companies need to purchase to use coal for generating energy, which all contributed to increasing in gas prices.
How much is my energy bill going to increase?
The energy price cap increased on the 1st October. The cap for variable or default tariffs will increase by £139 from £1,138 to £1,277 on average, while the cap for fixed tariffs will increase by £135 from £1,156 to £1,309.
Fixed tariffs are more reliable as the cost of your energy will stay the same for the duration of your contract and the cost of energy for variable tariffs can go up and down, depending on the market situation. You can read here about different energy tariffs.
What if my energy supplier goes bust?
There are over a dozen of energy companies that collapsed this year. If your energy supplier goes bust, Ofgem will automatically transfer your energy supply to another company, so you will still have gas and electricity in your home. The new tariff you get put on might not be the best one on the market, so you might want to look around for a better one.
However, you should not switch tariffs or suppliers until your account is completely moved to a new supplier, as this will make it harder to get any money that is owed to you.
What can I do if I am struggling to afford my energy bill?
The increase in energy prices is expected to push half a million more households into fuel poverty.
If you would like advice on switching providers, ring the Consumer Helpline on 0808 223 1133 – the Energy Team will explain your options.
There are also several grants and benefits for people facing fuel poverty, which you can read more about here.