The worldwide wholesale market's supply and demand dynamics have led to a sharp increase in energy prices for households.
As a result, the cost of gas and electricity for suppliers has increased, and this expense will now be passed on to consumers.
All six energy providers in Northern Ireland, as well as both gas providers, have raised their prices many times in the last year, contributing considerable sums of money to electrical bills.
The median energy bill could increase by nearly Pound 3,000 this October, according to recent forecasts. We define what it entails for you.
Once the next energy price limit goes into effect in October, according to new predictions, energy prices could very well increase by 51 percent, pushing average annual bills all the way up to Pound 2,980.
Energy costs would increase by 46 percent in October, analysts forecast in May, with a fresh price limit of Pound 2,879. Following another increase in wholesale gas prices, it has since boosted its prediction.
Analysts regretfully predict that ordinary consumers will be faced with a bill that is over 50% higher than the current cap, which would be an exponential rise as a result of the political situations in Russia, creating major obstacles to the transfer of energy and the predicament showing no signs of dying down.
Although the UK imports little or no energy from Russia, those who do are ultimately searching for new sources of gas. This will have an effect on the energy supplies coming from continental Europe to the UK, increase market volatility, and put even more pressure on prices.
Even when a large percentage of households will receive a Pound 400 energy subsidy in October to help alleviate the burden, the news that prices will climb by over Pound 1,000 this season will be bad for homeowners. Energy costs would have increased in just a single year.
Here is all the information you require.
WILL THE ESTIMATED PRICE CAP FOR OCTOBER 2022 CHANGE?
It's important to remember that things could still change; experts could revise their forecasts well before October new limit is disclosed.
Currently, the price of energy is very erratic and responsive to shifting world events. There is still a lot that could happen before the value of the October limit is actually confirmed, but the forecast already indicates that there is a clear and genuine risk that family energy costs will likely climb again in October.
Because of the uncertainty, households must make difficult choices in the face of increased taxes, high inflation, and rising food and gasoline prices. Because of the current crisis, there are no reasonable fixed-rate offers available that are less expensive than the threshold.
To prevent a further increase in October, you may even be tempted to switch to a fixed-rate plan close to the actual threshold.
NEXT YEAR, How Might ENERGY PRICES Shift?
Energy prices are expected to rise through the beginning of next year, according to insiders. It predicts that the energy price threshold will reach its maximum in January 2023, when it would total Pound 3,004 for the months of January to March. Then, it might decrease to Pound 2,759 in April 2023 and Pound 2,686 in July, although this is not guaranteed.
The expected price caps for 2023, despite predicting a decrease in the energy price threshold by next spring, are still substantially greater than the standard level.
What Does Energy Price Cap Mean?
The highest price per kilowatt hour (kWH), which energy companies are charging consumers for energy bills that are on a basic or default plan, is known as the energy price cap. About 22 million subscribers are impacted.
It's critical to keep in mind that this is not a cap on your bill's price but rather the highest price per unit of electricity or gas that companies may charge. Therefore, if you have a bigger house or use more energy than typical, your annual cost may be considerably greater than the cap.
The average annual cost of the current market price cap of Pound 1,971 varies depending on the customer and which supplier they choose.
Why are wholesale costs rising globally?
The cost of gas and electricity at the wholesale level, which is what our suppliers pay, has risen to an all-time peak. Energy suppliers have started to charge consumers for those expenses.
Prices have increased as a result of numerous variables affecting supply and demand. It's been described as a perfect storm by some commentators.
The newest factor driving record energy prices is Russia's invasion of Ukraine. The world's largest exporter of natural gas, which is necessary for heating homes, powering airplanes, and refueling automobiles, is Russia. It is also the second-largest exporter of crude oil.
Following Russia's invasion of Ukraine in February, the US, EU, and the UK imposed restrictions on imports of oil and gas from that country. Prices have already been high prior to that because of a very chilly winter in Europe.
Will prices continue to rise?
In essence, yes. According to Utility Regulator CEO John French, there will be 3 years of high expenses since wholesale prices, which determine what consumers pay, are likely to stay at an "unprecedented level."
"Once wholesale prices start to decline, our process of regulation allows us to intervene in Northern Ireland to ensure that decreases are completely passed on to consumers as soon as feasible," he continued.
According to Mr. French, regulators, suppliers, and the government should get ready to assist clients with high energy prices for the upcoming two winters.
What should you do?
Even though costs are rising everywhere, it is always beneficial to compare pricing. There is still room for savings, according to some individuals who run a website that enables customers to make energy business comparisons so that they may decide to switch their suppliers.
Price increases are the only direction prices can go at present. There is still an incentive to switch. There are more than 30 plans and six suppliers in the electrical market.
The price differential between the most costly and the most affordable plans is roughly Pound 180. There is little competition or option for gas customers, and several people cannot transfer.