Why gas and electricity prices are rising, and what you can do about it

Gas and electricity price rises are all over the news headlines with switching deals disappearing fast. This article explains what’s causing it, and what you can do about it.

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Gas and electricity energy price rises are all over the news headlines with switching deals disappearing fast. This article explains what’s causing it, and what you can do about it.

In May last year, wholesale prices were at record lows as demand plummeted amid Covid-19 related lockdowns.

Now, increased demand as economies restart has driven energy prices to record highs. In 2020, cheap fixed rate tariffs for a typical UK consumer were in the region of £700-800 per year, now they are typically higher than £1200 per year.

Why are there are fewer energy deals to choose from right now?

Energy prices have been rising for a few months now, driven by a surge in demand due to a recovering global economy. Over the last week wholesale prices have risen so quickly and so high that many energy suppliers have temporarily suspended taking on new customers, choosing to wait until wholesale prices begin to lower.

The energy price cap is rising

We had already reported that from October 1, the energy price cap for standard rate energy tariffs will rise by an average 12 per cent for those on billed meters and 13% for those on prepay meters.

For typical consumers this rise equates to an average cost of £1,277 per year, up £139 from the previous price cap of £1,138 per year.

What does that mean for consumers?

It unfortunately means that in the short term there will be less choice of tariffs which come with the savings that we are used to getting.

Just as concerning as consumer prices rising, are the number of energy companies who are struggling to stay afloat. The rising wholesale prices mean it is costing energy companies money to honour the fixed rate tariffs that they were offering ahead of the unexpected surge in prices, meaning they are operating at a loss. Four companies have gone bust recently including Utility Point and People's Energy, and the prediction is that many more will follow which will reduce further the number of competitive offers that are available.

Will prices come down again soon?

Expectations are that the price jump in September may be short-lived and we may see new fixed deals returning to the market towards the end of the year.

What can I do now - should I fix my energy prices?

Despite the gloomy news about energy prices in 2021, it's still worth checking you’re on the best deal.

A number of energy price comparison websites have stopped allowing customers to use their services. At Monva, we want you to continue to be able to compare gas and electricity prices so you can switch energy suppliers at the right time for you.

There are still some longer term energy tariffs available for switching, with a few energy suppliers offering two year fixed and three-year fixed energy deals that can provide certainty in the long run.

If you are already on a fixed rate deal then it is likely to be much cheaper than current offers in the market so it makes sense to stay with your existing energy supplier until it expires.

If you are about to move to a standard variable tariff (or default tariff) then it's worth searching for a gas and electricity deal to compare if any of the remaining fixed tariff deals can provide a saving.

Searching for a new gas and electricity tariff

First, find your existing energy tariff

If you’re not sure what tariff you have, try to find a recent bill or login to your energy suppliers online service where you can find previous bills. Your bill will have the information you need about your energy usage along with details of your energy tariff.

Check the tariff you have - Fixed or Standard variable

If you’ve never switched energy supplier or haven’t done so for more than a couple of years, you are likely to be on your energy suppliers standard variable tariff. Incredibly, 40% of UK households (11 million) are on one of these tariffs.

The standard variable tariff means your energy supplier can change the price you pay for your gas and electricity provided it gives you 30 days' notice.

Are fixed rate energy tariffs still a good deal?

Before the current and sudden price increase standard variable tariffs were among the most expensive on the market with cheaper fixed-term energy tariffs being better value.

The impact of the increase means things have changed, at least for the short term. At present, standard variable tariff/default deals are among the most competitive however you can still run an energy quote to see if you can get a better deal.

You can switch from a standard variable tariff at any point without penalty, so you can switch your energy supplier at any point should you find a cheaper deal elsewhere.

These actions by suppliers have resulted in our results showing fewer deals than we would normally display.

With Monva you can Compare Gas and Electricity, Compare Gas, Compare Electric and find Cheap Energy Deals. at any time and switch energy supplier when you find a saving.

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Tags: Energy