Over the last few days, there has been a lot of coverage in the media about the rapidly increasing wholesale price of natural gas, and the impact this will have on energy suppliers – and on you, the consumer.
Natural gas is the gas most of us use to power central heating systems, heat water and cook with on our gas hobs and cookers. But it’s also the gas used in gas-fired power stations, that generate some of the electricity we use, as well.
Many people are concerned about what this means for them.
We aim to answer the most frequently asked questions on this, below. If you have another question on this or any other matter related to your energy supply, bills or usage then please get in contact with us.
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There has been a rapid increase to the cost of wholesale gas. This is the price that energy suppliers have to pay to buy gas to supply to homes and businesses. This price is set by a global market for gas, which goes up and down all the time due to many complex factors. Recently, this price has been climbing rapidly and constantly. As a result, energy suppliers are facing greater costs, and some are even going out of business.
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As economies around the world begin to recover from the Covid crisis, and industry and other sectors start up again, the need for energy has increased. As well as leading to an increased demand for gas for heat and electricity, the UK has generated less electricity from wind than usual, which – combined with some planned and unplanned outages in other plants – has meant that we’ve needed to rely more on gas generation.
Many customers are on fixed term tariffs with their energy suppliers (indeed, we recommend fixed-term tariffs wherever possible!), which means they pay a set price for each unit of electricity or gas, no matter what happens in the wholesale market.
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First off, you will not be disconnected if your supplier ceases trading. You will still have access to gas and electricity.
Normally Ofgem (the energy market regulator) will appoint a ‘supplier of last resort’ – this would be another supplier taking on the customers of the one that went out of business. However, with gas prices this high, even the big suppliers are becoming reluctant to take on new customers. This has not happened yet though, and it may just be the suppliers trying to encourage the government to help, so this scenario might never happen.
In theory, though:
- You would remain on your current tariff until a new supplier is appointed by Ofgem.
- You would not be able to switch until a new supplier is appointed and has fully taken over your account.
- Your current supplier will have some operations until all the accounts are fully transferred, but you may not be able to get through to anyone at your supplier and you may not be billed until a new supplier is appointed.
It is important to remember you will still have to pay for the energy you use when a new supplier is appointed, so make sure you put money aside to cover this. Make sure you have a saved copy of your most recent bill or statement take and save a photo of your meters with both the current reading and meter serial number as soon as you find out your supplier has gone out of business.
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If you were in debt with your supplier this will not be transferred to your new supplier, but Ofgem state that you may still need to pay your previous supplier and the administrator may be in touch. If you are struggling to control debt on your energy bills, contact us about arranging an appointment with one of our energy advocates.
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If you have credit on your account and your supplier stops trading, the credit will be protected, and you won’t lose this. We advise that you download or retain your recent bills, and take a meter reading as soon as you hear your supplier is going out of business.
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There is a lot we don’t know yet, but it seems probable that energy rates will go up – at least temporarily. If you are on a fixed tariff, those prices will be honoured until the end of the period you signed up for (one or two years). If you are on a variable tariff, rates can go up and down with the energy market and you are more likely to see increases in your bill sooner.
If your supplier goes out of business, the new supplier Ofgem appoints will be the one offering the best possible deal for their collective customers. You are not obliged to remain with the new supplier you will not be subject to any exit fees if you choose to switch. However, you will probably end up paying more and the deals on the market now reflect the current high energy prices for both gas and electricity it is unlikely you will find anything to match your current deal.
Remember: the best long-term protection against rising energy bills is to reduce your energy use and improve the energy efficiency of your home. Our home energy advice lines, Warm and Well and Keep Herefordshire Warm, are here to help you minimise your energy use and access grants to improve the energy efficiency of your property.
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In short – no. The UK gas system is expected to deliver securely and has a variety of sources, both in the UK and imported from other countries. This recent price increase is also expected to be short-term, and as prices settle down things should return to normal.
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Natural gas is supplied to homes, business in industry and used in gas boilers and cookers, but it is also used in the generation of electricity in the UK. Therefore, the price of gas also has an effect on the cost of electricity as a whole, regardless of how it is generated. Suppliers also usually deal with gas and electricity customers, so your electricity supplier may be affected by the situation, regardless of whether you have gas connected to your home.
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Natural gas is supplied to homes, business in industry and used in gas boilers and cookers, but it is also used in the generation of electricity in the UK. Therefore, the price of gas also has an effect on the cost of electricity as a whole, regardless of how its generated.
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The answer to this is not clear. If your supplier ceases trading any credit currently on your meter will remain. When a supplier takes over your supply you will be sent a new key and card which you should then start using to top up. If you have a problem before you receive your new key and card you should contact the new supplier who will have had to demonstrate their ability to help prepayment customers.
In the unlikely event a new ‘supplier of last resort’ (see ‘What happens if my energy supplier goes out of business’) cannot be appointed the administrators should ensure that you can still buy credit for your gas and electricity in a normal way until one can be found, after which the above process will begin.
Despite this uncertainty, there are around 4 million prepayment customers nationally and Ofgem will need to ensure that connections are protected. If you have any concerns, please contact our home energy advice line team to discuss your circumstances and if appropriate arrange an appointment with an energy advocate to make sure you have the support you need.
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