Energy Prices: Why Are Electricity Bills Going Up?
Households are facing a sharp increase in their energy prices this winter due to supply and demand in the global wholesale market.
This has increased the amount that suppliers pay for gas – and that cost is now passed on to the consumer.
Over the past year, both Northern Ireland gas suppliers and the six electricity suppliers have increased their prices.
Who is raising energy prices? And how much?
It is expected to add around £ 182 to the average bill, according to the Consumer Council.
Power NI – which holds 50% of the electricity market in Northern Ireland – increased prices by 6.9% in July, adding around £ 41 a year to household electricity bills, the company said .
Their competitors have done the same.
Why are energy prices rising?
Wholesale energy prices – what our suppliers pay for gas and electricity – are at an all time high.
Energy suppliers have started to pass these costs on to consumers.
Why are global wholesale prices increasing?
Many factors have affected supply and demand, driving up prices. Some analysts have called it the perfect storm.
Warm weather in Asia saw more gas used for air conditioning, while Russia’s gas exports to northwestern Europe were also lower.
This has helped drive up gas prices in the UK, Europe and Asia.
Since January, they have increased by 250%. Prices have climbed 70% since August alone.
Are these tariffs not regulated?
The regulator is only responsible for Northern Ireland’s largest electricity supplier, Power NI.
The other five providers are unregulated and can increase their prices whenever and as much as they want.
The gas market is a bit more complicated. The utility regulator must approve any tariff changes proposed by Firmus Energy in its network of ten cities, but not in Greater Belfast.
SSE Airtricity must also go through the regulator for price increases in Greater Belfast.
The utility regulator has capped the amount of profit gas suppliers can make at around 2%.
Power NI earnings are capped at 2.2%.
Why can’t the regulator stop the increases?
The utilities regulator has “little control” over wholesale energy costs, said John French, chief executive of the utilities regulator.
Record-breaking wholesale energy costs are one of the main reasons for the price hike, Mr French told BBC News NI.
“Since this item accounts for about 50% of a consumer’s electricity and gas bill, it will have a big impact on the end price you pay.”
So, although a company’s profits are capped, that does not prevent prices from rising as the cost of raw materials increases.
The real cost of energy is about half of our bills and the rest goes to the companies that run the pipes, and other costs.
So if the price of energy goes up, so does the amount that companies have to charge to make that 2% profit.
But that cap doesn’t mean these companies aren’t performing well, according to Peter McClenaghan of the Consumer Council.
Will prices continue to rise?
“Prices only seem to continue to rise unfortunately and it is in both gas and electricity,” said Peter McClenaghan.
“Historically, the regulator reviews gas tariffs every six months, with a potential change coming in October or April, so we’re unlikely to see another increase until April 2022.
Mr McClenaghan expects Power NI’s regulated electricity tariff to increase during the next review, which is scheduled to take place in January 2022.
“There’s nothing stopping other electricity providers from raising prices in the meantime, although they may be reluctant to do so because people will just go elsewhere.
“Based on discussions with other electricity providers, it is likely that wholesale price increases mean their prices could rise again before the end of the year.”
What can I do?
Although prices are rising everywhere, it is still worth shopping around.
Aodhan O’Donnell, who oversees a website that allows consumers to switch providers, said it had been a year of increase.
“Prices are only going one way at a time, they will continue to rise.
“The incentive to change is still there. In the electricity market there are six providers and over 30 tariffs. There is a difference of around £ 165 between the more expensive and the most competitive tariffs.
“For gas customers, the choice and competition are limited, and some people cannot change,” he said.