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Aug 17,  · Why are energy bills rising so much? Energy bills are rising as a result of rocketing gas prices, which have increased fold since The UK is particularly . Aug 26,  · Ofgem introduced an ‘energy price cap’ in Great Britain in January following concerns that many people, particularly those who did not switch supplier to find cheaper . Sep 17,  · The rising utility bills are being driven by the surge in the price of natural gas, which generates about 40% of the United States’ electricity.
 
 

 

Why are energy bills rising so much –

 

The graphs below from Ofgem’s wholesale market indicators show how both gas and electricity prices have risen throughout and into As you can see from the graph below, the price of electricity almost doubled between the start of June and the end of July, when gas prices hit a high of Prices have been very volatile all year, but the overall trend is upwards.

But why are wholesale prices so high? It’s down to a series of events that have conspired to hit at once, some globally and some just for us here in the UK. The conflict in Ukraine is currently having a huge impact on what was already a big problem with energy prices more on that below , but the following issues have also combined to inflate energy rates:. It’s all because of the way the UK’s energy system works.

Although renewable energy accounted for almost half And that’s where the pricing issues come from. Energy prices are set using a system called ‘marginal cost pricing’. In short, this means that the most expensive type of energy is used to set the price for all types of energy, including renewables.

As gas-powered stations are used to top up electricity demand in the UK, so the cost of gas-powered electricity is used to set the price of all electricity. The system is under review until October 22, but one thing that might have gone under the radar in the Prime Minister’s energy cap announcement was that renewable and nuclear power is to be moved off marginal pricing and onto Contracts for Difference.

This will mean the cost of renewable and nuclear-generated energy will no longer be tied to gas prices. Instead, generators will get a fixed, pre-agreed price for the low-carbon electricity they produce during the time the contract is running. This de-coupling of costly global fossil fuel prices from electricity produced by cheaper renewables should help ensure consumers benefit from cheaper prices when switching to lower-cost, clean energy sources.

The energy price cap was introduced in to limit the amount that energy suppliers could charge domestic customers on standard variable rate tariffs SVTs.

But this has now been replaced by the ‘energy price guarantee’. The energy price cap was introduced in to end what Theresa May, then UK Prime Minister, described as ‘rip-off’ energy bills. But the recent energy price crisis has seen the power of the price cap diminish and bills become unaffordable for thousands of domestic customers. The level of the cap has been reviewed every six months since it was launched, but this was due to change to every three months from January next year.

This review period has now been shelved as the energy price guarantee will run for the next 24 months. It’s worth noting that the cap sets the prices that suppliers can charge for each unit of energy and the standing charge which has doubled in some areas , but that doesn’t mean there’s a limit to how much people can pay.

If you run your small business completely from home, you might not even have switched to a business energy deal, in which case you’ll be directly affected by the cap in one of two ways:. If you run a business from home, it naturally follows that you’ll use more energy than if you were spending your working hours at commercial premises, particularly during the winter months.

And the more gas and electricity you use at home, the bigger your household energy bills will be. Check out our Bionic guides to find out more about business energy deals and working from home , along with some energy-saving tips to save to help cut your bills.

If you don’t work from home and run your business from dedicated premises – say you run a salon or restaurant – then you’ll not have the protection of a price cap. Although you’ll have a bespoke business gas and business electricity deal at your workplace, you could still find that your commercial supplier has increased rates to cover increased costs at your next renewal.

That’s why it’s important to compare deals when your switching window opens. If you’re in the restaurant or takeaway business, check out our guide page to find ways to save money on your energy bills and get a quote for restaurant energy to see how much you could save.

It’s hard to predict energy prices at the best of times, but the current market volatility makes it impossible to say whether energy prices will go down this year. Although prices have gone up and down across the year, the overall trend has been that prices have risen. Forecasts from Cornwall Insight, energy research and analysts, suggest that energy prices could remain high into next year and even into But the news of the energy price guarantee capping rates for both homes and businesses means that the rates you pay won’t change for the remainder of the year and into for domestic energy users.

Fixing your energy rates is the only way to bill stability in an unstable market and protect against future price rises. Although we can’t predict whether prices will continue to rise, they’ve risen significantly over the last 12 months and anyone that secured a fixed deal in September would have made significant savings on their energy bills. The introduction of the energy price guarantee in October means it’s unlikely that you’ll need to switch until April next year at the earliest.

This is because business energy prices will be capped until then for most businesses. If you’re unsure what to do, give our energy experts a call on We only need your postcode to run a price comparison of rates from our panel of trusted UK suppliers. If you can’t afford your business energy bills, it’s important you speak to your supplier as soon as possible to sort out a repayment plan.

If you don’t work something out with your supplier within 30 days of your missed payment, they can start action to disconnect your energy supply. For more information, check out our guide to business energy bills. As outlined above, there are many reasons why energy prices are currently so high. The conflict in Ukraine has pushed rates up even higher.

This is because energy prices are affected by things that are happening across the globe — anything from a conflict to a natural disaster in a country that produces oil or gas can affect how much we pay to heat our homes and power business here in the UK. One of the main reasons why this conflict is having such an impact on our energy bills is because of how reliant Europe has become on Russian gas.

Although the UK isn’t as heavily reliant on Russian gas, it does import almost half of its from Europe. This means any price hikes for European supply will have a knock-on effect for the UK. The situation is causing panic in the energy market. Securing your rates today is the only way to protect your business from any future price changes.

And then there’s the geopolitical situation to consider. For a concise breakdown of the current state of affairs, check out this piece in The Guardian. Let’s quickly go back to the first lockdown of early , when a drop in demand saw energy prices drop to their lowest ever levels.

Prices have been steadily increasing since then. A greater need for energy since the crash of March and April last year has seen gas prices increase more than five-fold and return to pre-pandemic levels. For the wholesale electricity market, there has been a reduction in available power supplies compared to last year which, combined with higher gas prices, has led to an increase in the wholesale price of electricity.

Higher electricity distribution and transmission costs have driven a rise in network costs, as has an increase in policy costs, such as the Renewable Obligation RO. For reference, the RO is a levy placed on all licensed electricity suppliers to encourage them to source a proportion of the electricity they supply from renewable energy sources. The pandemic has also seen more energy suppliers hit by ‘bad debt’. For more information on the types of things that can affect energy prices, check out our guide on how to compare business energy tariffs.

He even suggested that “high gas prices will be here for the next 18 months to two years”. The government is coming under pressure to step in and help consumers by way of a VAT cut or a lowering of other charges not directly linked to the wholesale price of energy. Trade bodies, including the Chamber of Commerce and NFRN, have been urging the government to give financial help to business owners in the form of cuts to VAT on energy, a commercial energy price cap, and a Government Emergency Energy Grant for SMEs — essentially Covid-style support for this latest crisis.

A price cap on business energy has now been announced, but the details are limited. The price cap will last for six months from October 1. There will be a review after three months to decide whether the cap should be extended for more vulnerable sectors, such as hospitality. The only way business owners can currently shield themselves from out-of-contract rates and any potential future price rises is to lock in existing rates as soon as possible.

So, consider the following:. For more detailed information, check out our blog on how to save business energy and money. But you also need to be realistic.

But energy prices have been back on the rise since hitting a low towards the end of July and the current situation means costs have gone beyond pre-pandemic levels. Not all business energy tariffs are the same – if you choose the wrong one, your business will pay too much for gas and electricity.

And because signing up to a business energy deal means you’re locked in for the duration of the contract, you could be paying too much for anything up to five years. This might leave you wondering whether it’s worth bothering at all – here’s why it definitely is worth comparing business gas and business electricity deals.

When switching, you’ll need to bear in mind that the rates you’re offered will depend on things like the amount of energy you use, the location of your business premise, and whether or not your business is in good financial shape – a poor credit score could see you paying higher rates, as your business is seen as a higher risk.

The quickest and simplest way to find the best business energy deals is to speak to the tech-enabled human experts at Bionic. Just give us your business names and postcode and we’ll use smart data and our own expertise to find the best business gas and business electricity tariffs for your business in a matter of minutes. To get started, pop your business postcode in the box at Bionic. Our business energy experts will then search for the best deals from our panel of trusted and quality UK energy suppliers, then help you choose the right energy tariff over a short call.

And there’s no need to worry about renewals either, as we can find you the best deals year after year. If you’re relocating your business , one of the following two things will happen to your energy contract:. When you sign up for a business energy deal, you’re rarely allowed the leeway to leave it early.

This is because your supplier will buy the right amount of energy to see you through the duration of the contract, so it stands to lose out if you end it before the agreed end date. Relocating your business offers a rare chance to end your current business energy contract early and switch to a better deal, but you need to weigh up the options before making the decision to switch.

If you transfer your existing energy deal to your new premises, your supplier will take care of this for you, so there are no issues and your only billed from the first day you move into the new place. If this seems like too much hassle, bear in mind that switching could save your business hundreds of pounds a year and switching with Bionic means our tech-enabled experts will take care of all the hard work for you to ensure a seamless switch.

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Finance What can we help you with? Business Loans. Commercial mortgages. Secured loans. Russia’s invasion of Ukraine in February then led to sharp cuts in gas supplies to Europe , sending European natural gas prices to a record high and triggering a rise in electricity prices, too. Even though the U. The U. Since the start of , 31 British energy companies have collapsed due to the spike in wholesale prices, with their customers transferred to other market players.

From Oct. As well as destabilizing businesses that had not sufficiently hedged their energy purchases, the price cap — which makes Britain somewhat of an outlier in how it deals with energy prices — has been deemed unfit for purpose for failing to prevent the current eye-watering price rises for consumers.

According to regulator Ofgem, the cap was introduced in to stop consumers who do not regularly switch suppliers from facing excessively high fees, rather than to prevent overall price rises which are dictated by wholesale markets. Nicolas Bouthors, equity research analyst at Paris-based AlphaValue, told CNBC that a few bankruptcies in smaller companies were still possible this winter, but it was likely all or the majority would weather the storm.

However, there is no doubt that millions will struggle to meet their bills at the current predicted price cap levels the official figure will be announced by Ofgem on Aug. Yet in light of updated forecasts this now looks “very modest,” said Fic of Moody’s, and will still leave many households struggling to pay, and utilities — many of which operate with low margins — facing the risk of growing bad debts.

Despite the public, commentators and politicians of all stripes arguing far greater measures are needed to avert an unprecedented crisis over the winter, the candidates to be the next British prime minister, Liz Truss and Rishi Sunak, have been mud-slinging over each others’ plans for tackling it.

Both have said there is a need to wait until the new price cap is confirmed by Ofgem, and for measures to only be confirmed after the leadership election wraps up next month. While the likes of Centrica , owner of British Gas, have come under fire for not doing more for consumers after reporting healthy profits for the first half of the year, Piper said the sector as a whole wasn’t able to suffer the kind of losses it would need to to offset wholesale price increases, which could remain elevated for years.

Ultimately, Piper said the government would need a plan to fix energy prices at their current level and cover the difference to suppliers, or to raise the energy price cap and provide households with a rebate. Meanwhile, the opposition Labour Party has said it would freeze the current price cap by extending the windfall tax and finding other savings.

The scale of the current emergency has also led to debate over the potential for renationalizing the energy industry, or for the temporary nationalization of energy companies unable to bring down prices, as advocated by former Prime Minister Gordon Brown. Some, including Utilita Energy Chief Executive Bill Bullen, have argued any additional support packages should be targeted toward lower-income households; others say the scale of the problem requires the widest possible safety net.

 
 

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