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Gas and electricity price changes 2021

Gas and electricity price changes 2021

The energy market has become extremely volatile due to a range of factors that have caused the price of energy to dramatically increase. While the energy price cap for standard variable tariffs (historically the most expensive type of deal) had already increased to a maximum of £1,277 from October 2021, prices for fixed tariffs (historically the cheapest type of deal) now, in the main, exceed the price cap level. What does this mean for you? Find out here.

Compare energy prices here

It's a good idea to compare energy regularly to see what the latest prices mean for you, even though there are fewer deals available. Enter your postcode to get started.

See which energy suppliers have made gas and electricity price rises or price cuts, how much energy prices went up or down by, and when price changes will come into effect.

And don't forget, whether gas and electricity prices are rising or falling, it's always a good idea to compare energy prices in your area to see if you could cut your energy bills.

2021 gas and electricity price rises

Since the introduction of Ofgem's energy price cap in January 2019, most suppliers have based energy prices of their "default" or standard variable rate tariffs on the rate of the price cap.

Following an increase in the price cap level announced in February 2021, suppliers raised their prices for customers on default tariffs.

All of the 'big six' energy suppliers then announced price rises with each implementing an average £96 annual increase for customers on standard variable and default tariffs. These price rises came into effect from 1 April 2021.

However, Ofgem announced a further increase to the price cap level in August, to come into effect in October 2021. This saw the level not only increase twice in a year for the first time, but also rise to its highest ever point of £1,277, a 12% increase. Suppliers were quick to announce standard variable tariff increases to the cap level or just below.

In September, though, the price of wholesale energy rose to a point where it became untenable for suppliers to keep offering deals at the rates they had been. This meant that the prices of fixed energy deals soared where most of them became much more expensive than the capped standard variable tariffs, even at £1,277.

This means that customers on standard variable tariffs will be protected at least until 1 April 2022, when the cap’s new rate comes in. They know they won’t have to pay a rate higher than £1,277 per year (energy usage notwithstanding - if you use more, you’ll pay more). With this in mind, it could be advisable for customers to stay on standard variable tariffs for now and see what the market looks like next year, rather than switching to an expensive fixed deal for up to 24 months which could cost a lot in the long-term.

What can I do if my energy supplier raises prices?

If you're on a standard variable tariff and your supplier tells you its energy prices are going up, you would usually just switch to a new supplier (or even another tariff with your current supplier) to get a better deal - though, as mentioned, this might not be the case now.

Whether or not your energy supplier has recently increased energy prices, it's always a good idea to run an energy comparison to see if you could save.

I've never switched energy before - how does it work?

If you want to switch to avoid energy price rises, it's easier than you might think to switch energy supplier.

Here's what you need to hand:

  • Your postcode
  • A recent energy bill
  • Your bank information (to set up your direct debit)

If you can't find an energy bill we can estimate your usage based on the size of your home.

That's it! We'll do all the rest, including comparing top deals in your area, and providing savings figures, customer ratings, and the ability to filter by preferences including green plans and more.

If you want a little more assistance, call one of our energy switching experts on 0800 6888 244.

For step-by-step instructions on how to switch energy suppliers after a price rise, read our dedicated guide about how to switch your supplier for gas and electricity here.

What causes energy price rises?

There are several factors that can cause suppliers' gas and electricity prices to go up or down.

Market forces can cause the wholesale price of gas to rise or fall which then has a knock-on effect on energy bills. This is why prices have risen twice in 2021 - you can find more details here. However, wholesale gas prices aren't always the cause of energy price changes.

The energy price cap

In recent years, the most significant gas and electricity price rises and cuts have been in reaction to changes in Ofgem’s energy price cap. But how can a cap change the prices suppliers are allowed to charge?

The cap was first introduced in January 2019 and limits the amount that suppliers can charge for their default gas and electricity tariffs. Many suppliers, including the big six energy providers, set their rates right up to the maximum allowed by the cap.

Just a month after its implementation, Ofgem announced it would increase the rate of the cap to £1,254 per year. Many suppliers reacted by announcing price rises to come into effect when the price cap changed in April 2019.

The cap has since been reviewed twice a year, with the most recent change being a price rise of £139 which came into effect in October 2021.

Limited supply

Gas is pumped out of the ground and electricity is mostly generated using a mix of fossil fuels like oil, gas and coal. These are all natural supplies, which are costly to get hold of, and more importantly, in limited supply.

Despite there being a limited supply of fossil fuels, the technology to find and extract them has advanced significantly and has meant that there is no shortage of gas and electricity.

The limited supply of fossil fuels could impact gas and electricity prices if energy companies were looking very far ahead into the future, but in the short-to-medium term, supply should not be a factor.

Global conflicts

Wars in oil-rich countries and conflicts between countries over gas pipelines can impact wholesale prices. For example, wholesale gas prices in the UK have spiked when supplies in Ukraine, Iraq and Syria have been threatened in recent years.

For the most part, these spikes have been temporary, and the supply of gas and electricity has remained constant in the UK throughout these conflicts, so it isn’t the ultimate factor.

UK energy providers

There are some arguments that energy providers could afford to keep prices low but instead choose to maximise profits by raising prices. However, the industry regulator Ofgem aims to provide transparency in the way the sector prices its gas and electricity. Ofgem also aims to keep the market competitive to ensure that consumers get the fairest price possible.

You can go to the Ofgem website to see how much profit suppliers made each year.

To some degree all of the above arguments could have some impact on your energy prices, but consumers are able to take back control by switching. By comparing energy prices you can switch to a cheaper provider and ensure that energy gas and electricity suppliers have to stay competitive to retain their customers.

What makes energy cheaper?

Because energy suppliers have to keep the cost of their standard variable tariffs within the price cap, their prices can drop when the cap rate is reduced. This has happened several times since the introduction of the cap - where the price cap rate has fallen, suppliers have been forced to drop their energy prices too. It's important to remember though that the price cap only applies to suppliers' standard variable tariffs, with most fixed deals being much cheaper to start with.

Another element is competition. Energy suppliers need your custom to be profitable. If their customers leave because there's a cheaper energy provider or one with better service, then they lose out.

Comparing energy prices and switching your energy provider is one of the easiest ways of getting cheaper gas and electricity bills. Suppliers are always trying to win customers from their competitors by offering cheap deals.

Will gas and electricity prices rise again in 2021?

Prices on standard variable tariffs won’t rise again in 2021 as the price cap isn’t due to be reviewed until April 2022. They’ll almost certainly rise at that point, though.

The prices of fixed deals have already gone up but the long term view of where they’ll go is much more uncertain as they’re not protected by the cap. Ofgem's energy price cap rate has already been set for the period between October 2021 and April 2022. The price cap rose by 139 for average dual fuel customers.

Because most suppliers set the price of their standard variable tariffs very close to the cap rate, this means energy suppliers react by raising prices on their standard variable and default tariffs by a similar amount. All of the big six providers (British Gas, E.ON, EDF Energy, npower, SSE and ScottishPower) have implemented price rises for customers on their standard variable and default tariffs.

It's a good idea to compare prices from energy providers and see if you can switch to a cheaper energy deal before any price rises happen. Remember that you're very likely to find a cheaper fixed deal if you're currently on your supplier's standard variable tariff.

For more information, head to our energy market Q&A guide.

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