Why Is the Cost of Electricity Rising?

Energy costs are still sky-high, and bills are a major issue for individuals and companies throughout the UK due to rising demand, constrained supply, a lack of storage capacity, and the situation in Ukraine.

The “energy price guarantee,” a new iteration of the energy price ceiling that will now include companies, has been unveiled by the government.

This indicates that a cap of £2,500 per year would be used in place of the intended domestic price cap level of £3,549.

The Energy Price Guarantee, as opposed to the price ceiling, will also apply to commercial customers. According to the government, this will be in effect starting in October for six months before being reviewed in three months to see whether it should be extended for companies in more susceptible industries (like the hotel industry) after April of the following year.

However, the specifics are still ambiguous, and the governments advise doing business as normal. As soon as new information becomes available, we’ll provide an update.

Is there a cap on energy prices for commercial entities?

The “energy price guarantee,” a new iteration of the energy price ceiling that will now include companies, has been unveiled by the government. This price ceiling will apply to commercial and residential energy consumers, unlike the previous one.

What are the current facts on the energy price guarantee for businesses?

Here is what we currently understand about the energy price guarantee:

Between October 2022 and April 2023, it will be accessible to all enterprises for six months. The price guarantee will be reviewed in three months to see whether companies in particularly susceptible industries, including the hotel industry, should have it extended past its original expiry date.

The new domestic cap of £2,500 per year for the typical household serves as its foundation.

Government advice is to continue doing everything as normal until we know more. As soon as we learn more, we’ll update this page with the new information.

What is unknown regarding the energy price guarantee for companies

The news of corporate backing is positive. However, several details need to be made clear, such as:

How much will the standing charge and the cap on unit rate be?

Do all commercial energy users, or those paying rates not covered by a contract, qualify for the energy price guarantee?

How will business energy rates change after April of the next year?

In the next few days, we will have answers to all of your concerns. In the meantime, feel free to contact us with any further inquiries, and we’ll get back to you as soon as we have more information.

Why are energy prices now so erratic?

Supply problems are a significant factor, particularly in light of Nord Stream 1’s total closure, the massive pipeline that transports gas from Russia to Germany. This has significantly decreased the amount of gas that could be transported to Europe, contributing to a significant increase in natural gas prices to their highest rates since early March.

When combined with the strong worldwide demand for energy, these supply limitations are raising prices for businesses and families throughout Europe. As a result, inflation is rising and recession worries are growing.

Our technologically advanced professionals have provided incredibly wide ranges of quotes for corporate energy. Additionally, since August 2021, providers have raised out-of-contract gas prices by an average of 18% and out-of-contract electricity prices by 130% without regard to any business cap.

Wholesale energy costs are now at record high levels, so energy providers are charging such exorbitant rates; if they are even able to do so, some have had to temporarily withdraw from the market.

Here’s why these wholesale rates have an impact on the cost of gas and electricity that we all pay:

  •       Energy is purchased by suppliers from the wholesale market and then sold to residential and commercial energy users.
  •       When wholesale prices rise, energy providers raise their pricing to offset the additional expenses, which results in higher energy bills for all of us.

If you switch to a fixed-rate agreement, you will be protected from any mid-contract price increases, but you will undoubtedly discover that your rates will increase at the following renewal.

Even though market prices are constantly rising and falling, a rise in wholesale energy costs is nothing new. However, because prices are so high and unstable, it is difficult to forecast how much they will rise or fall from one day to another, much alone over a year.

It will be a good idea to make a Business Energy Comparison if you want to save costs on energy.

How energy costs will increase in 2022

Wholesale energy prices have changed over the past few months; following a significant surge in December 2021, prices have been especially unstable in 2022. The general tendency is upwards, even though they have dipped and risen rather dramatically.

The market indicates that the high gas costs will remain in place for the next 18 to 2 years, according to Centrica CEO Chris O’Shea, so there is little indication that this will change very soon.

Using data from Ofgem’s wholesale market indicators, the data illustrate how prices for both gas and electricity increased during 2021 and into 2022.

How has the cost of gas changed in 2022?

Between the beginning of June and the end of July, when gas prices peaked at 420.86p per therm, the cost of electricity nearly quadrupled (a therm is approximately 29 kWh). Even though prices have been quite volatile this year, the trend is rising.

How has the cost of energy changed in 2022?

From June’s first day to July’s last, when it peaked at £413.59 per MWh, the energy price then quadrupled. Even though prices have been quite volatile this year, the trend seems to indicate that they will keep on rising in the future.