Why are energy costs so high?
The cost of energy has increased by a massive amount since the start of the year. Indeed all six of the big energy suppliers have all raised prices. In this turbulent financial year, JSTFinancial.co.uk ask why, and is there anything we can do about it?
Unfortunately if you are a customer of British Gas; EDF Energy; Scottish Power; NPower; E.ON and Southern Energy, then you have had significant price increases.
In early January, Npower put prices up for its electricity customers by 12.7%, while its gas price rose by 17.2%. That same month, EDF put up electricity tariffs by 7.9% and gas prices by 12.9%. British Gas, Scottish Power and E.On all increased gas bills by 15%, whilst Scottish and Southern Energy was the last to make the move with an average 14.2% increase in electricity bills, and a 15.8% lift in gas charges for domestic customers coming into force on 1 April.
Is there a reason?
The problem facing the energy companies is that the prices that they pay have also increased in recent months. Indeed EDF state gas prices have risen by as much as 117%, with electricity prices raised by 90%.
The companies also cite a doubling in their spending commitment to reach government carbon emission reduction targets as a major contributing factor.
Is a Competition Commission investigation likely?
It seemed unlikely that an investigation would occur, however when British Gas announced massive profits the regulator OFGEM said it would look closely into the matter for households and small businesses. OFGEM claimed that earlier that year, there had been no evidence of anti competitive behaviour or any ‘price fixing’ between the big six. However if this review finds any evidence of problems then it could refer it to the Competition Commission for further investigation.
Domestic customers are still able to switch very easily between suppliers, and the market seems to be working well in this way for the consumer.
Will our bills ever be lower?
Prices did drop from the massive highs of early 2006, but began to rise again in early 2007. A number of factors have been relevant. Most of our gas is still produced in the North Sea, but production has declined much quicker than expected, therefore meaning the UK has had to import more gas supplies. The wholesale price of gas has been driven up by the costs of crude oil, which was almost $100+ per barrel. Likewise, rising coal prices have made the costs of producing electricity more expensive.
Can we import more?
The issue here, is now that of supply and demand. As we look for alternatives to import because prices are so high here, it has seen huge demand, meaning that imported gas has become extremely difficult to obtain.
Our relationship with some of Europe’s energy firms has been stretched to the limit, as the European Commission found that some of Europe’s biggest firms were holding back gas supply to drive up prices. They promised an immediate crackdown on ‘anti-competitive behaviour’. British Gas however have said that transporting supplies through Europe is tricky, as the pipeline is owned and ran by several different national monopolies or semi monopolies.
What steps can be taken?
The only option really is to try and use less gas and electric, or find a cheaper supplier. Let JSTFinancial.co.uk search the market for you and find you the best deals. A lot of the energy companies are now fixing their prices for specific periods of time, or offering price matching. You really can make significant savings over time by taking up one of these deals.
Does switching supplier really work?
The government actively encourages homeowners to switch to cheaper suppliers. It really depends on your usage and tariff, and what area of the country that you live in, as to how much you will save. With competition as fierce as ever the choices for consumers is massive, so let JSTFinancial.co.uk guide you through the jargon and work out the best deals for your personal circumstances.