Energy bills increase by at least £139 to record high

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Energy bills for 15 million households will surge by at least £139 to a record high under Ofgem’s latest price cap as suppliers grapple with soaring wholesale prices.

The regulator decided in August energy customers on default tariffs paying by direct debit will see the sharpest jump in prices since the cap was introduced in January 2019, taking average bills to £1,277.

Meanwhile pre-payment customers will also see costs rise by £153, from £1,156 to £1,309.

The increase has been driven by a rise of more than 50 per cent in energy costs over the last six months, with gas prices hitting a record high as inflation jumped amid the easing of pandemic restrictions, Ofgem said.

But it comes at a difficult time for many Britons, who are grappling with the end of furlough, a cut to Universal Credit, supply chain disruptions and creeping inflation.

The latest cap was determined before further unprecedented increases in global prices, which has seen nine small UK suppliers collapse since the start of September.

Day-ahead UK gas prices are only just behind the all-time highs registered during the ‘Beast from the East’ in 2018, hitting 203p last night – a staggering 500 per cent increase on this time last year.

European contracts have also hit successive record highs and up 550 per cent.

The jumps have been caused by a perfect storm of events – some underpinned by the rapid rebound from the pandemic but many of which are out of governments’ control.

Citizens Advice said this week consumers who are moved to a new energy firm after their supplier goes out of business stand to pay almost £30 a month more just as the new price cap comes into effect.

The energy watchdog warns people will face ‘desperate choices’ this winter after finding customers of the five largest failed suppliers are set to pay £6.70 more a week when moved on to the default tariffs of a replacement firm.

Although households that shop around and sign up to fixed plans with suppliers are not subject to the price cap, the recent wholesale hikes have seen firms deterring new customers and hiking the cost of their fixed plans significantly above the price cap.

The regulator reviews the price cap once every six months, and changes it based on the cost that suppliers have to pay for their energy, cost of policies and operating costs, among other things.

And in further bad news for energy customers, research agency Cornwall Insight has already predicted that Ofgem’s next price cap will rise by £178 from April.

Dan Starman, head of assets and infrastructure at Cornwall Insight, said: ‘This isn’t purely a British phenomenon.

‘It is international and is to a large extent being driven by the fundamental imbalance between global gas supply and demand.’

Adam Scorer, chief executive at fuel poverty charity National Energy Action, said: ‘The massive devastating increases in energy prices will drive over 500,000 more households into fuel poverty, leaving them unable to heat or power their homes.

‘Just when they were needed most, the uplifts to Universal Credit are also being withdrawn and inflation is soaring.

‘The new Household Support Fund will provide some welcome support for those who can access it, but on its own it is not enough to halt the erosion in incomes and deal with rising prices.

‘Without a wider package of support – keeping Universal Credit uplifts and more rebates to protect those on the lowest incomes from spiralling energy prices – vulnerable people are still at dire risk of premature death this winter.’

It comes after the cost of gas on wholesale markets rocketed at unprecedented rates, up 70 per cent since August and 250 per cent since the beginning of the year, according to trade body Oil & Gas UK.

The End Fuel Poverty Coalition warned fuel poverty could become ‘endemic’ in the UK and published a map showing the worst affected places in England.

It said the number of households in fuel poverty could rise from 4.1million to 5.3million.

The worst place in England for fuel poverty is Barking and Dagenham, followed by Stoke-on-Trent and Newham, according to the coalition.

Meanwhile Bracknell Forest, Runnymede and East Hampshire are among the areas least affected by fuel poverty.

The coalition – which includes Age UK, Fuel Poverty Action Group, Unison and Generation Rent – has launched a petition calling on the Government to take immediate action to avert the fuel poverty crisis this winter.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: ‘The latest rises in wholesale prices means that we face the possibility of more households facing fuel poverty than ever before.

‘And with fuel poverty comes increased risks of suffering the worst effects of respiratory illnesses, such as Covid-19.

‘Indeed, when combined with the increase in general prices caused by inflation and Brexit supply issues we face the real possibility of fuel poverty becoming endemic in our society.’

Gas prices across Europe have been on a steep upward trajectory this summer after a long, cold winter left storage levels far below normal.

Russia has also been sending over less gas than usual – which many experts have interpreted as a political powerplay aimed at putting pressure on European leaders to open up a controversial pipeline project called Nord Stream 2.

More broadly, there has been rampant demand for shipping tankers and energy in Asia – which quickly bounced back from the pandemic – leaving less available for the rest of the world.

Sam Wahab, energy analyst at SP Angel, said: ‘Asia got in on the act quite early on because they were the first to come out of the pandemic relative to the likes of Europe and the US – so they got a bit of a head start.’

The global problems matter for Britain and have driven the UK crisis because successive governments insisted the country can rely on foreign imports of liquid gas and undersea cables that connect to European grids.

The UK was vulnerable when good weather meant there was less wind and a fire at a crucial interconnector that linked the British and French power grids hit supply.

It led to a 16 per cent spike in prices that sent shockwaves through UK manufacturers and forced US industrial giant CF Industries to temporarily shut its fertiliser plant – which had the knock-on effect of creating less CO2, a key byproduct.

The crisis gripping the UK and Europe threatens to send inflation soaring. Prices in Britain are rising at the fastest rate since 2012. In Spain, inflation is at a 13-year high. 

Countries such as Lebanon – hit by fuel shortages – and Brazil – struggling with lower than usual hydropower generation – are grappling with their own struggles.

But it is China, the world’s economic powerhouse, that is facing a toxic cocktail that is terrifying analysts.

Blackouts are hammering many areas and industrial production is tumbling as coal stocks – a major source of the country’s power – are down to dangerously low levels by Berlin standards.

Higher energy prices cannot be passed on to consumers under Chinese laws, so businesses and factories are wilting under the higher costs – forcing many regions to ration power for heavy industry or even stop it altogether.

China’s issues might not be exactly the same as Britain’s but if its problems end up tanking its productivity and holding back its economy – which analysts are already forecasting will grow at a slower pace this year as a result – then the whole world is in trouble.

For the UK, what is most frustrating about the current crisis is that it is, at least in part, at the mercy of the weather.

Another ‘Beast from the East’ that stretches gas supplies to the max could be ruinous – whereas a mild winter could bring a sigh of relief.

Wahab said: ‘A lot of it depends on factors outside of our control – namely weather patterns and the political landscape.

‘The thing about energy consumption is a lot of drivers outside of human control dictate it.

‘In Europe, if we have a particularly harsh winter the consumption is still going to be strong as gas powers a lot of our electricity.

‘You can switch off the heating and use an extra blanket – but you’ll still need power to keep the lights on.’ But geopolitics will play a role too.

Wahab added: ‘Russia is one of the largest gas producers in the world and this winter depends in part on how much they allow to be sold out in the international market – and Russia has historically been quite unpredictable.’

What’s worrying too is that even if gas prices do not rise further, they are unlikely to fall significantly – putting pressure on industry, government, businesses and households whose finances have already been stretched to the brink.

Today’s rise in power bills could be just the beginning – with some experts predicting the next time the price cap is reviewed it could go up by £280.

How nearly 1.5million customers of nine collapsed energy firms could face paying up to hundreds of pounds MORE for their electricity and gas bills after being taken on by new providers

Nine energy firms have gone bust with customers transferred to other providers The new providers are raising prices with the annual price cap to rise in October It means customers of the collapsed firms could have to pay hundreds more 

Customers of collapsed energy firms who were forced to transfer to new providers are now facing higher prices, it emerged this week.

Several firms have gone bust amid surging gas prices, with fears that more could follow in the winter.

The companies left around 1.5million customers without energy, forcing other firms to step in and take them on. 

But those firms, which include British Gas, E.on and EDF Energy, are charging customers substantially more money over a year. 

Under the ‘supplier of last resort’ system, outstanding credit balances owed to existing and former customers will be paid and householders transferred will be protected by the energy price cap. 

But customers who were on cheaper fixed price deals, signed before the gas price rise, were warned that bills could jump by hundreds of pounds. 

And now, with the annual price cap set to rise to £1,277 from October for a typical household, British Gas and EDF Energy are among the suppliers set to charge customers the top rate. 

For example, 580,000 Avro Energy customers will see their bills rocket from as low as £870 to £1,267 with new supplier Octopus Energy. 

And 360,000 customers on Green Network energy will see annual tariffs rise form £976 to £1,277 with EDF Energy.  

Avro was the largest of several companies to go bust this month after the wholesale price of gas soared.

Customers are able to change supplier or tariff without exit fees after the switch-over but may struggle to find equivalent deals.

The Government has shied away from offering energy firms a bailout despite concerns few are strong enough to take on transferred customers.

It comes after a move to less reliable wind and solar power left Britain at the mercy of international gas markets and re-ignited the debate over energy security.

On the weekend it emerged ministers are considering a ‘change of focus’ to nuclear as a more reliable green energy source.

The Government has been criticised for not replacing ageing reactors sooner, with the UK to lose more than a fifth of nuclear power generation when two plants are retired next year.   

News of price increases comes after new research revealed that families face paying billions to rescue the customers of collapsed energy companies. 

Investec found the current bill for the seven firms that have already gone bust stands at £820million, but this could rocket if more companies follow them as expected this winter.

Energy companies that take on customers from failed rivals are able to reclaim costs, including that of buying more expensive gas and electricity from the wholesale markets to cover the new households. 

This is paid from an industry levy that goes on all customers’ bills. As it stands, each household will pay £30 each to rescue customers of firms that have already collapsed. 

Analyst Martin Young calculated that the difference between what suppliers can charge new customers under the UK’s energy price cap and the cost of purchasing energy at today’s inflated prices was ‘at least £550’ per customer, the FT reported.  

When this is multiplied by the 1.5million orphaned customers it comes to £826million. 

But last week Scottish Power chief executive Keith Anderson warned customers could foot a bill running to ‘billions of pounds’ due to the chaos. 

Wholesale prices for gas have increased 250 per cent since the start of the year, and 70 per cent since August, meaning these unprotected firms are buying energy for less than they sell it to customers. 

Nine firms have now ceased trading this year, with the head of regulator Ofgem warning more are likely to follow leaving ‘well above’ hundreds of thousands of customers in limbo.

Jonathan Brearley declined to give an estimate when in front of MPs on the Business, Energy and Industrial Strategy Select Committee but said: ‘We do expect a large number of customers to be affected, we’ve already seen hundreds of thousands of customers affected, that may well go well above that.’ He warned the crisis may not be temporary.

But business secretary Kwasi Kwarteng rejected claims that there could be just 10 energy firms left by the end of the year as he repeated his vow that ‘lights won’t go out’.

He told MPs: ‘I don’t see how they got to that figure. I would be very surprised if we got to that figure … it is not something I am anticipating.’

But ministers have admitted that some families will face a choice between ‘eating and heating’ this winter and dismissed pleas from Britain’s floundering energy providers to scrap the energy cap that protects millions of the poorest households.