The latest UK energy statistics found that the overall selling value of UK energy was £69.7 billion in 2021 – a 23% increase from the previous year. The energy market has become extremely volatile due to a range of factors that have caused the price of energy to dramatically increase.
Since the introduction of Ofgem's energy price cap in January 2019, most suppliers have based energy prices of their standard variable rate tariffs on the unit rates capped by the price cap.
At the start of 2023, customers' variable tariffs were capped at an annual level of £2,500 (illustrative for average use dual fuel customers paying by direct debit) under the Energy Price Guarantee. This was because the price cap had risen to financially prohibitive levels as a result of a volatile energy wholesale market, so the government's subsidised EPG was brought in to keep bills at a manageable level for customers.
As of October 2023, variable tariffs are capped under Ofgem's price cap again. It has been lowered to £1,834 per year for an average use household until 31 December 2023., though it will increase to £1,928 in January 2024.
In September 2021, 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 to the point that most of them became much more expensive than the capped standard variable tariffs, even at the then price cap level of £1,277.
If you're on an expensive standard variable tariff, you would usually just switch to a new supplier (or even another tariff with your current supplier) to get a better deal.
Deals are now starting to return to the market in limited quantities, so it's a good idea to run an energy comparison to see what's available (whether you decide to switch to a fixed deal or stay on a standard variable tariff). Run an energy comparison by entering your postcode below.
Otherwise, the best option is to try and manage energy usage around the home in order to keep bills as low as possible. Utrack, Uswitch's new mobile app, can help. Find out more below.
It's a simple process to switch energy supplier. Here's what you need to hand:
Your plan name
Your bank information (to set up your direct debit).
That's it! We'll do 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.
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.
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 increased so dramatically throughout 2021 and 2022. However, wholesale gas prices aren't always the cause of energy price changes.
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, which is reviewed and updated four times a year. 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. However, because the cap was dictated by wholesale energy prices, customers have felt the brunt of suppliers' rising costs with their tariff prices increasing as a result.
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.
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.
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.
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.
Price on standard variable tariffs will increase in 2024 - the price cap level from 1 January to 31 March will be £1,928. However, wholesale energy prices have been dropping since December 2022, so the overall trend is pointing downwards.
For more information, head to our energy market Q&A guide.
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