According to data provided by the Guardian.com, the average energy bill in the UK will top £1,300 by 2020. After several years of the ‘big 6’ energy firms putting up their prices, ordinary householders are struggling to heat their homes. Faced with growing anger from the public, the government recently announced that the energy market in the UK will be the subject of a comprehensive inquiry carried out by the Competition and Markets Authority (CMA).
If you are struggling to keep pace with gas and electricity prices, and you’re concerned about when the next price rise may hit, there are a few tell-tale signs to look out for.
Another UK Supplier Announces a Price Increase
While gas and electricity suppliers constantly refute allegations of working together on prices, it seems that when one of the ‘big 6’ suppliers announces a price increase, the others follow suit within two or three weeks. If another of the UK’s major energy retailers announces a significant increase in the cost of domestic electricity and gas, you can be fairly certain that your own supplier will do the same in the coming days.
The Government announces a new Green Levy
Despite the government cutting green levies on energy bills recently, it is under intense pressure from the EU and the Kyoto Protocol to cut carbon emissions and invest in green energy sources. These levies were initially implemented in order to raise the investment funds needed for long-term projects. They were cut due to growing public pressure, but it seems inevitable that they will be reintroduced when the political climate is right.
Wholesale energy costs are on the rise
According to OFGEM, between 40 and 50 percent of our energy bills are made up of the wholesale cost of energy. In general term, this is the price our suppliers pay for electricity and gas on the open market. Unfortunately, these prices are often linked to factors beyond the control of the UK government. For instance, the tensions between Russia and Ukraine may drive up the price of gas, as The Russian Federation currently supplies around a third of the EU’s requirements. Political unrest in the Middle East, where the majority of the world’s oil reserves are located, may have a knock-on effect on the cost of electricity.
New Infrastructure Projects are announced
One of the responsibilities of the UK’s energy providers is to invest in new infrastructure projects. Our gas and electricity grids are ageing, and the need for new power stations and generation projects is growing increasingly urgent. Energy companies are beholding to their shareholders, so their primary focus is often on profits, meaning money needed to fund such projects is usually raised through increased prices.
Your Energy Supplier announces a Profit Warning
All of the ‘big 6’ energy suppliers are public companies, accountable to thousands of shareholders around the world. This means that company bosses face the sack unless they can deliver profits, drive up share prices and produce a healthy stream of dividend payments. If one of these companies has performed poorly, the obvious thing to do is raise prices on what is an essential commodity for everyone.
The cost of energy is the biggest financial challenge facing average householders in the UK today. By paying close attention to the latest news, you may be able to predict when the next price hike is on the horizon or think about switching to a cheaper gas and electricity suppliers.
Ronald Hurk works for a well known energy provider and enjoys blogging in his spare time. He often provides insights and advice for consumers looking for savings.