Recent research into energy prices comes with a warning to millions in the UK: an Ofgem energy price hike is coming, for the second time in 2021. Energy prices already increased back in April, causing the average annual energy bill to rise to £1,138.
A second increase, due to be announced by Ofgem in August, will push that amount to £1,250, compounding the already rising costs of energy for the millions of UK households that have seen their bills soar due to homeworking – and the coldest winter since the 1990s earlier this year.
Why will there be a price hike?
While learning the basics of energy saving, such as regular boiler maintenance or learning how to bleed a radiator, can help reduce your bills, there’s no denying that a price hike twice in one year will have an impact on most people’s wallets. The prediction comes from the independent energy market analysts at Cornwall Insight. They have identified several key reasons why a price hike is highly likely – although it is important to stress that their research is not, at this point, confirmed by an announcement from Ofgem, which is expected in August.
A perfect storm of rising wholesale prices and a shortage of both gas and electricity will push prices higher, as the Cornwall Insight experts explain. Wholesale energy prices are at their highest levels since the ‘Beast from The East’ winter of 2018. ‘On top of this, natural gas prices have risen considerably due to a cold winter across Europe and low levels of gas in storage facilities’, writes Craig Lowrey, Senior Consultant at Cornwall Insight. ‘Unforseen and prolonged outages of several ageing fossil fuel and nuclear plants’ will also drive up the electricity prices.
What do the average figures really mean for me?
The average figure of £1,250 per year is just that, an average figure given for guidance and used to show the extent of the increase. It is based on typical household energy consumption – in reality, your own annual energy bill could be significantly higher or lower than that figure. What changes is always the price of energy per unit, not any fixed price per year. Most energy providers these days will give you an annual estimate based on the price of energy per unit on your tariff and your own personal usage (or past usage, if you’ve just switched providers).
Should I switch my energy provider?
Switching your energy supplier can be a good strategy, especially if you are on your current supplier’s standard tariff. These are often (though not always) more expensive than fixed-term tariffs, and you may have been automatically put on one if you haven’t switched your energy deal for a while. having said that, many energy providers will also have a cheaper fixed-term deal and will allow you to switch to it from their standard tariff, so it’s best to contact them first.