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Rising wholesale energy prices, gas shortages, and small energy suppliers going bust is causing a crisis in the UK’s energy market.
But how will this affect your energy bills? Here’s what you need to know as a small business owner.
There are many compounding factors causing the UK energy market crisis. For one thing, the government has said there’s been an ‘uptick in global gas demand this year’ as the world comes out of Covid-19 lockdowns and the economy reopens.
This huge demand has caused wholesale prices to increase to a record high – up 70 per cent since August and 250 per cent since the start of this year.
We’re also experiencing a gas shortage across the country. This is partly down to a cold winter last year and low winds over the past few weeks meaning coal burning has supplemented the lack of wind power.
Not only that, the rising wholesale price of gas is causing smaller energy companies to go bust, with more expected to follow in the coming weeks.
Whether you’re a small business owner running your business from home or you have a commercial property on a business tariff, you’re likely to be affected by higher energy bills in the coming months.
Ofgem has announced a price cap that will come into effect on 1 October, which means there’s a limit to how much your energy company can charge you. The standard variable rate will be capped at £1,277 – but that’s an increase of 12 per cent. It’s worth noting that this is based on a typical household usage so, if you use more energy, your bill will be higher.
The price cap is reviewed twice a year, so the rate could increase yet again on 1 April 2022 if wholesale prices continue to climb.
Ofgem is responsible for protecting your energy supply, and any credit on your account, if your energy company goes bust.
If this happens, they’ll transfer you over to a new energy supplier and a new tariff within a few days and you won’t have any interruption to your gas and electricity supply.
You can find out more about the Ofgem safety net on their website.
There’s no getting away from the rising costs, but you might be able to switch to a cheaper one or two-year fixed deal now if you act quickly.
Otherwise you may be best sticking with your current supplier as tariffs are going to go up everywhere and you’re unlikely to find a better deal elsewhere.
Unfortunately, if you need to switch either because your supplier has gone bust or your fixed rate deal comes to an end, you’ll find it difficult to find any cheap deals.
There are also concerns that the energy crisis will have a knock-on effect on the food industry as two big fertiliser plants have been forced to shut.
These plants produce carbon dioxide as a by-product, which is used in the production of meat and soft drinks. So a shortage of supply could dramatically impact supply chains and stock on supermarket shelves.
The news of soaring energy prices will be yet another blow to the small business community that's still recovering from the impact of the pandemic and is facing growing costs with the National Insurance hike announced earlier this month.
Do you have any questions about rising energy costs? Let us know in the comments below and we’ll do our best to answer.
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