Why Wholesale Energy Prices have been Rising and what Tariff is Better for you

Posted by Marshall Financial Solutions on 12th October 2021 -

11 October 2021 - Wholesale energy prices – the prices suppliers pay to buy energy – have risen by about 250% since January. As we have recently seen when this happens it’s usually unwelcome news for customers as it means an increase in their energy bills. Those on Variable tariffs will have recently experienced this.

Here we examine what’s caused the rise in wholesale prices, and which tariff – Fixed or Variable – could be the best option for you.

Reasons for increases: 
 

A colder winter 

In January, gas supply came under pressure due to a long period of very cold weather which lasted well into the spring. With more people at home, this increased the use of heating during these months. Countries in Asia also experienced a cold winter which has led to an increase in demand.
 

Renewable energy generation 

Periods of low wind resulted in wind turbines losing their productivity for some time. Supplies have also been hit by several nuclear power stations going offline for maintenance, causing a drop in the production of wind energy. In addition a recent fire at a National Grid site in Kent closed a power cable supplying electricity from France.
 

Effects of lockdown easing

Since March last year, more of us have been spending more time at home due to lockdown restrictions. As the economy starts to open up, this has led to more demand globally for oil and power.   

 

Fixed vs Variable tariffs: how are they priced and which is better for me?

Fixed

Our Fixed energy tariff guarantees that the cost of your energy will not go up or down for a set amount of time. At UW, we set our Fixed tariff to last for about 12 months. 

Remember – even if you fix your plan, that doesn’t necessarily mean you’ll be paying the same amount for your energy each month. While your unit rates remain fixed, your bill may vary from month to month depending on your energy use.

Advantages of a Fixed tariff:

• You get peace of mind that your energy unit price won’t go up even if there’s a shift in wholesale prices. 

• Right now, even though our Variable tariff is cheaper than our Fixed, there is a very good chance it will remain the cheaper option over the course of 12 months because further price increases are expected next year.

Disadvantages of a Fixed tariff:

• If wholesale prices decrease over the course of 12 months, you won’t benefit from lower energy prices.

 

Variable 

With this type of tariff, the price-per-unit is based on wholesale energy costs and other factors, which will have a direct impact on your bill. 

There’ll be pricing variability, which means that the price of your energy can go up and down – but we won’t do this more than twice a year.

Advantages of a Variable tariff:

• You take advantage of reductions in wholesale energy prices without waiting for the end of a fixed contract.

• You’re not tied into a contract, and can leave any time for a better deal.

 

Disadvantages of a Variable tariff:

• At the moment prices are rising – so as they rise, so will your bill. 

• It’s harder to budget, as you don’t know exactly how much you’ll be paying in the future. But we’ll help you be prepared as much as possible and adjust your payments accordingly.

 

Which tariff is better for me? 

For long-term savings, it may be best to take Green Fixed tariff, as there is a good chance it’ll be cheaper over the course of the next 12 months with further price increases to Variable tariffs expected next year.

The good news is that, whether you take on our Fixed or Variable tariff, both now come with 100% renewable electricity*.

What’s more, when you sign up to UW, we’ll also plant a tree in your name. And if you decide to take a free smart meter, we’ll give you an extra £50**. So whichever tariff you choose, you’ll be getting a great deal.