Wednesday 8 September 2021 4:02 pm

Record price spikes: Tough winter looms over households and energy firms

The UK’s recent period of low wind output and global gas supply shortages have energy suppliers gritting their teeth for the winter to come, and maybe even the next.

The country was forced to light up a coal plant at the turn of the week amid a spike in energy prices, pushing up costs to record levels.

Households and manufacturers are now anticipating higher energy costs for as long as two to three years, The Telegraph first reported, unless the demand for gas slows or fresh supplies emerge.

However, there are concerns that some energy firms may collapse before a relief is found, as suppliers grapple with climbing wholesale costs and rising energy bill price caps.

PfP Energy and Moneyplus Energy both confirmed on Tuesday that they will stop trading, a decision which has hit some 89,000 domestic customers and 5,000 business customers.

“It’s an unprecedented market situation I think means we’re going to have an unprecedented response”, one energy industry insider told The Telegraph.

“This is the first time in the price cap era that we’ve had such a huge rising commodity price situation.”

A changing landscape

Households have been increasingly more likely to opt for energy startups, rather than large scale energy players like British Gas’ Centrica or EDF.

Nearly all households bought their energy from energy giants in 2013, but today, more than a fifth of their market share has been swallowed by young, small but well-funded firms.

However, these smaller firms are far more exposed and vulnerable to rapid cost inflation, as opposed to firms like SSE or E.ON.

Gas prices hit a record 136.6p per therm on Tuesday, an eyewatering increase from less than 30p per therm just one year ago. While power prices topped a record £240 per MwH on Friday, quadruple the average level seen over the past 10 years.

It means an increasing number of UK customers’ energy supplies and bills will be at risk across the upcoming winter months.

Rising price caps

A number of suppliers have cemented in lower prices in advance or alternatively, have other strategies to cut their exposure to wholesale costs, but these measures are unlikely to cover all customers.

Some customers may also be left vulnerable to high wholesale costs if they switch deals.

Under the price cap – the maximum price suppliers can charge customers on a standard tariff – suppliers will be able to add £139 to their standard rates from October.

The rising price cap will mean an average dual-fuel bill will be bumped up from £1,138 to £1,277, according to regulator Ofgem.

But The Telegraph’s sources have forecast that a fresh tariff would need to be priced at £1,450 to £1,500, to cover the costs of energy, which makes attracting new customers more difficult for smaller firms in the market – like PfP Energy and Moneyplus Energy.