Gas and Electricity Bills: Are You Feeling the Pinch?

While energy suppliers are dealing with the skyrocketing prices now, businesses and households will feel the effects very soon as suppliers pass the costs on.

For domestic households, an energy regulator sets a price cap: the maximum price that suppliers can charge. There is no price cap to protect businesses from these increased costs.

Why do energy prices increase over the winter holidays?

Energy prices generally fluctuate with the seasons. During the colder and darker months, demand is increased while supply may be limited.

• Weather is one of the main drivers of volatility for natural gas prices. Natural gas is primarily used for heating, so when a winter is particularly cold, demand for natural gas substantially increases. This increased demand can cause a shortage in the market which will push prices higher.

• Solar generation is minimal as the daylight hours are shortened. Wind generation is usually stronger over winter, but sporadic. Overall, the country cannot rely on renewables during times of high demand. 
  

Why are energy prices increasing by record levels?

There are several unexpected factors at play that are causing fluctuations in the global energy market:

• There are gas shortages across Europe caused by long and cold winters in 2020 and 2021. Storage facilities are extremely depleted.

• Rising tensions between Russia and Ukraine are causing concern for potential gas and oil supply disruptions. The Nord Stream 2, a pipeline running from Russia to Europe (and bypassing Ukraine) with the capacity to supply up to 26 million households with natural gas, is unlikely to be certified.

• A high demand for liquefied natural gas (LNG) in Asia is causing Europe to rely on limited natural gas storage.

• French nuclear output for 2022 is estimated to decrease by 10% due to faults in several nuclear reactors that cause prolonged outages.

• COVID restrictions are easing worldwide, increasing demand globally.

Specifically in the UK:

• Lower winds than expected result in very low renewable energy generation.

• National gas reserves only contain roughly 2% of the UK’s annual demand.

• A National Grid site fire has shut down a power cable between France and the UK, limiting power supplied from the continent until fully repaired in October 2023.

Will energy prices keep going up? What can I do about my high energy bills?

Energy prices are predicted to continue rising and those with out of contract rates will be affected by future volatility in the market. If you find your increasing utility costs to be of concern, we offer brokering services in electricity, gas, and water for businesses of all sizes. We work directly with suppliers to ensure competitive “locked in” rates for our clients. If your business is looking for a review of your current energy contracts, new rates, or to switch energy suppliers, we can help you find the best deal.