For months now, experts have warned that the ongoing energy crisis is set to continue until well into 2022. However, we’ve now been given an idea of how much worse the issues we’re currently facing could become, with Martin Lewis warning that bills will likely go up by as much as 40% next year.
But, in spite of the fact that bills will likely rise substantially next time the energy price cap is reviewed, the current advice is that you should not run an energy price comparison in order to switch suppliers.
Why you shouldn’t switch
At the moment, switching supplier could actually make your energy bills more expensive, particularly because there’s little to no competition available now many suppliers have gone bust. Plus, the best energy deals available from the UK’s best energy suppliers are currently unable to beat the price cap.
This time last year, the cheapest fixed-term energy deal you could get was around £830. Today, this has risen to £1,730. This means that prices on comparison sites have more than doubled in the last 12 months.
As a result, although people who are on the price cap are usually encouraged to switch so they can save, the current advice is to simply do nothing when your fixed-term deal ends. This is because the current price cap (£1,277), is much cheaper than the cheapest fixed-term deal available.
Plus, because the price cap only moves every six months, you can rest assured that the cost of your energy will not increase until at least the end of April and will remain the cheapest meaningful tariff you can get until that time.
Why is energy costing so much more?
The reason your energy bills are likely to rise substantially next year is the fact that wholesale energy prices have skyrocketed over the last six months, with the price of wholesale gas now four times higher than usual. Back in March, the price of wholesale gas was around 50p per therm. However, its price has exploded since and it reached highs of around 290p per therm in November.
But, the current price cap is partially based on the wholesale prices experienced between the end of February and July 2021. When renewed, the new cap will have to factor in the much higher wholesale prices we’ve experienced since then. As a result, the cap will likely rise by around 40%. While Cornwall Insight believe it will rise to around £1,700 when renewed, National Energy Action believe it will be set at £1,830.
That said, because we’re only two thirds of the way through the period the new price cap will be based on, these educated guesses remain speculative. As a result, the advice remains to do nothing until a new price cap is announced. If wholesale prices come down before then, you may be able to switch and save, undercutting the price cap in the process.
