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- July 2, 2022
The pressures that came quite sharply to bear on the UK energy sector in autumn 2021 were the result of larger geopolitical shifts globally. However, they do have very real consequences for the average renter. Furthermore, we may not have seen the last of these crises. We’ve done our best to break down the main takeaways here so renters can be more informed to navigate these waters in 2022. The headlines screming about a 3000% increase in Britain’s electricity prices need not scare consumers away just yet!
Starting from January 2021 wholesale gas prices, according to the industry group Oil & Gas UK, have risen by 250%, with a 70% rise hitting the UK within August alone. The UK government through its business secretary Kwasi Kwarteng were quick to reassure the public that the “lights won’t go out” this winter and new year period from 2021 to 2022. Can the average renter take the government at its word? And even if the government could justifiably be taken at its word on this matter, are there any prudent steps that the smart, money-saving consumer should be following in 2022, just in case?
As the world’s population was caught up in the strictest forms of lockdown restrictions in 2020, people were spending more time at home, and this increased energy expenditure. For example, in Spain, gas storage levels were reported by the BBC to have fallen from 51% of capacity, to in January 2021, 35% of capacity. Record high demands for liquid natural gas in Asia over the 2020-2021, caused European nations to lose out.
This drained capacity which occurred during the strictest lockdown periods, then put energy suppliers and nations in trouble when the world then began waking up from the pandemic, so to speak. When industry and travel started to pick up pace as the lockdown restrictions eased, the energy capacity was found to be even more lacking. These difficulties encountered espeically by countries such as the UK as the “world was waking up from the pandemic” as the UK Prime Minister put it, added fuel to the fire of exploding energy wholesale prices. The UK was perhaps in an especially vulnerable position because of its relatively high dependence on gas for heating homes, more so than its European neighbour nations.
The official UK energy regulator, Ofgem (Office of Gas and Electricity Markets), restricts how much consumers can be charged. This is so, if the wholesale costs swing wildly, those volatile changes will not be passed directly to consumers and upset their budgets for household bills. Energy suppliers in the UK are restricted by Ofgem from charging unjustifiable prices for energy.