September 23rd, 2021 by Chris Chapman

Help and Advice During the UK Energy Crisis

The UK’s energy crisis is the result of a perfect storm of individual issues that have added up to create a serious problem. This problem is having knock-on effects on all parts of life, including food availability and prices, freight, transport, and more. The end result is that large portions of the country may be left with dramatically increased energy bills. This article will explain what you can do to keep your energy bills as low as possible this winter.

What is Causing the Energy Crisis?

Gas is a crucial part of the UK’s energy infrastructure. Not only are millions of homes directly reliant on gas pipelines for heating, but gas is also used in electricity generation. Energy providers need to buy gas wholesale to produce power for their customers. Wholesale gas prices have increased sharply over the course of this year, rising 250% since the turn of the year and 70% since August. This sharp, sudden increase has meant some energy providers are unable to purchase the gas they need and have gone out of business.

The price rises at the core of the issue are driven by many separate things. The first is that the UK – like much of the rest of the world – had a colder-than-average winter last year that lasted for longer than usual. This means natural gas stockpiles have been severely depleted as millions of people have relied on their heating more than usual. As companies rush to rapidly build up these stockpiles again, demand has outstripped supply, causing increased prices. Many countries around the world have experienced the same issue, leading to a global shortage. At the same time, the global economy is waking up after a year of COVID-related shutdown. Industries that rely on gas are going back to work, further straining supplies.

Other issues are unique to the UK. A relatively calm summer saw lower-than-average wind power generation across the country, further increasing the demand for gas-generated power. In addition, the worker shortage and freight disruption occurring after Brexit has led to an increased strain on supplies.

Potentially compounding all of the above is the role of Russian state-backed gas company Gazprom. One of the world’s leading providers of gas, Gazprom are currently under investigation by the European Parliament on suspicion of market manipulation.

Individually, these problems would cause a small, temporary effect on energy prices. When combined, they are resulting in a dramatic and sustained increase in energy prices, affecting gas, oil, and electric costs. This is expected to last throughout the winter and deep into next year.

What Can I Do to Keep My Energy Bills Low?

One of the reasons this crisis is causing so much concern is that there is very little customers can do. The only thing you can do is to prepare yourself by making sure your heating is as efficient as possible, especially if you use electric heating. If you have not yet upgraded to modern electric heaters or radiators, with aluminium or ceramic heating elements and energy-saving features like open window detection and timers, now is the time to do so. Look for Lot 20 compliant electric heaters that guarantee maximum efficiency.

Individual electric heaters also provide a more cost-effective way to complement your existing central heating. They tend to give you more flexibility when programming them. This allows you to – for example – only heat the rooms you’re in when you know you’re going to be in them, as opposed to wasting energy heating your whole house when you don’t need to. Features such as open window detection will also be crucial in keeping your energy bills as low as possible. When your window is open, any heat produced by your heating will escape, and your thermostat will be unable to reach its target temperature. This means your heating will run at maximum power for no real benefit. Heaters with an open window detection mode will detect the sudden drop in temperature that occurs when you open a window and shut the heater down. It will also detect when the room temperature stabilises after you close the window again and turn it on at your previous settings.

Other energy-saving features to look out for include fully programmable 24/7 timers and smartphone control. Smartphone control often lets you group your heaters into zones, making it easier to only heat the rooms you are in.

You can also take steps to better insulate your home to reduce waste energy even further. Consider installing draught-excluding strips around doorframes or between exposed floorboards.

Is My Energy Provider Going to Go Out of Business?

If you are with a smaller operator, it is possible they could go out of business. Smaller operators often cannot stockpile fuel to the same extent larger suppliers can, so they will be the most affected by sharp increases in wholesale prices. According to analysis from Baringa Partners, there could be as few as ten energy suppliers that survive the winter, down from 70 at the beginning of the year. There is the possibility that the government could step in to support energy companies, with a windfall tax on big suppliers being one possibility. However, at the time of writing, most of the attention is being given to protecting customers from unaffordable energy bills.

What Should I Do if My Energy Provider Goes Out of Business?

The rapidly rising price of gas means some suppliers cannot afford to buy any more and are folding. If this happens to your supplier, you will be protected to some extent by the UK’s energy regulator, Ofgem. Your power will not be cut off and you will be automatically switched to another supplier. Ofgem chooses this supplier for you and places you on a special “deemed” contract with them. You do not need to pay any exit fees to end your contract with your existing supplier. If you are in credit with your existing supplier, any money you are owed will be returned to you. You do not need to do anything, although we would advise taking a meter reading as soon as you can. Your new supplier will contact you to inform you of everything you need to know.

While you are protected against being cut off, you may end up on a more expensive tariff than you were before. Ofgem has an energy price cap that protects you against extreme price rises (the cap varies depending on the costs in the energy market) but you may not necessarily end up on the cheapest rate. You are free to ask your new supplier if they have any cheaper tariffs or shop around for a better rate without incurring any exit fees. We would recommend doing this, as “deemed” contracts tend to be more expensive because of the risk involved for the energy companies.

Help if You Are Struggling with Energy Bills

Increased energy bills are inevitable this winter. If you are worried about being able to afford these higher costs, there are many methods of help available. Ofgem rules that govern every UK supplier states that your supplier must work with you to help agree on an affordable payment plan. Your supplier can agree to give you a payment holiday, a payment break or reduction, and put you in touch with customer support services.

FAQs

I owed my supplier money when they went out of business. Will I have to pay this to my new supplier?

If your new supplier takes on the customer debts from your old supplier, you will need to pay what you owe to the new supplier. However, if your new supplier does not make this arrangement, you may not have to pay anything. They will contact you shortly after your account switches with details about this. Remember, if your old supplier owed you money, this money is protected by Ofgem and will be returned to you.

Should I cancel my direct debit to my old supplier?

You can do this if you want. You will be able to set up a new direct debit with your new supplier once they get in touch with you.

My supplier has just gone out of business. Should I switch now?

No. As you will be given a new supplier, switching yourself can confuse this process. Once this process is complete and your new supplier has contacted you, you are free to switch with no exit fees.

How long does it take for Ofgem to switch my supplier?

It can take up to two weeks.

I’m a business customer. Is my credit balance still protected?

Ofgem does not guarantee protection for businesses. However, you can contact the administrator of your old supplier who may be able to help.

I use a prepaid card for my power. What help is available to me?

At the start of the coronavirus pandemic, the government made help available for prepaid energy customers. This help is still in place. It could include prepaid cards or allowing smart meters to run in credit mode.