You’ve probably seen the news and are currently wondering what on earth is going on with energy prices.
It’s a question we’re being asked a lot right now, and it’s important we update our users with what’s going on.
What’s going on
In short, the wholesale price of natural gas has increased massively.
It’s the most expensive it’s ever been, which is a problem for a lot of countries.
But, why is this a problem?
The UK uses a mixture of sources to generate power, including (along with some others) solar, wind, coal, nuclear and natural gas. Natural gas makes up roughly 40% of that mix.
Historically, when the price of natural gas increases significantly we would switch to other sources to avoid paying the high prices.
The problem this time around is that it’s not been particularly windy or sunny this year, we don’t have as many coal power centres, and we have very low reserves of stored natural gas.
When you couple this with an increase in global demand for natural gas, you experience an extreme price increase.
What this means
Suppliers are paying more than they’ve ever had to for the energy they provide our homes with, and many of us are locked into cheap fixed tariffs.
If you’ve switched through BillBuddy in the last 12 months, you’re most likely on a relatively cheap fixed tariff now.
Those who aren’t on fixed tariffs (or are on voluntary variable tariffs) will be on their supplier’s default tariff, also known as the Standard Variable Tariff (SVT).
When you’re on an SVT, your supplier cannot charge you more than the price cap dictates. The price cap was introduced by OFGEM (the energy regulator) to protect those on SVTs from being charged too much.
There’s another big problem here – it’s costing more for suppliers to provide homes with energy than they’re legally allowed to charge under the price cap.
Put shortly, suppliers are losing money. A lot of money.
When suppliers lose money like they are now, it’s inevitable that some of them will go out of business – we’ve unfortunately already seen this in the past week with People’s Energy, Utility Point, PFP Energy and MoneyPlus Energy.
My supplier has gone out of business – what do I do?
The first thing is not to panic – OFGEM have a safety net in place for this exact situation.
All of your credits are protected, and you’ll be securely moved to another supplier (normally one of the big 6).
You’ll already have seen an email from me with more details if you switched through BillBuddy to a supplier that’s no longer operating.
What to do next
There’s no perfect answer here, so instead we’ll provide all of the facts.
If you’re currently on a fixed tariff
Your fixed deal will likely be coming to an end at some point in the next 12 months, at which point (if you do nothing) you’ll be moved on to your suppliers SVT.
Normally that would be the worst thing that could happen (which is why we alert you before this happens).
Strangely, this might be the best option right now because you’re protected by the price cap.
It’s important to remember that the price cap is increasing on the 1st of October, and will almost certainly increase again on the 1st of April.
When you’re on an SVT, your rates will rise with the price cap.
If you’re currently on your supplier’s SVT
Your rates will go up on the 1st of October, and most likely go up again on the 1st of April.
After that, there is no telling if they will go up or down.
If you’d prefer certainty, you may want to switch to a fixed tariff. Just be aware that the rates will be higher than you’re currently used to!
The bottom line
As always, we’re here to support you and help with any questions you might have.
Whilst we only make money when we switch our users to cheaper energy deals, our mission is to help our community.
During this volatile time, we’re constantly monitoring the market on your behalf.
As soon as you can save money, we’ll be in touch to help switch you over safely and seamlessly.
In the meantime, we’re here to help. If you have any questions at all, please don’t hesitate to get in contact with us.
If you’re worried about paying your bills, we recommend visiting this Citizens Advice page.
Keep an eye out for an email from BillBuddy, we’ll be on standby to save you more money as soon as we can!