The Current Energy Crisis and what you should do?
You will have read a lot in the media about the current energy crisis, which is caused by the basic economic effects of supply and demand!
The crisis is: the wholesale price of energy (gas and electricity) has risen exponentially in the last 12 months to extraordinary levels as demand has outstripped supply.
As a result, many companies, mainly in the residential sector, who have been buying in business by offering hugely attractive rates, now find this model impossible to maintain. They have not been “hedging” their own purchase costs (getting fixed price contracts for themselves), which now means that many of them are now buying energy at a much higher price and are reselling it to their customers at the contract price, meaning that they are losing money every time one of their customers use energy.
Clearly this is unsustainable.
So, what are the energy companies doing:
1. They can go out of business – 5 companies in the residential market have gone out of business over the last three weeks or so and rumours suggest that others will follow shortly.
2. They can cancel your fixed price contract – most “fixed price” contracts have a clause in them saying that the supplier reserves the right to cancel fixed term contracts in exceptional circumstances: we have heard of a company in the business sector that has done this today for several their customers.
3. They can do nothing and hope for the best.
As a consumer what should you do if any of the above happen:
• If you are a business, then contact your energy consultant and get them to help you with the issue.
• If you are a residential consumer then you are largely on your own, although OFGEM has a safety net in place to ensure that you are not left without energy. But you are not without hope – see the advice below.
If your current supplier of residential energy goes out of business, then OFGEM will arrange for a new supplier to bill you for your energy. This will not be at your current contract price, but will be subject to the “Price Cap”, which has recently increased.
You have no choice but to allow this to happen. However, once the new supplier has taken over you are then able to change suppliers. However, most energy companies are not offering fixed rates now and comparison sites have not been able to offer new rates either, so you must do the legwork yourself.
By packaging up your utilities, there are “meal deals” available out there which can give you a cracking energy deal.