200% wholesale price increase
If you are living and working in the UK you will know that wholesale energy prices have risen 200% during the first 9 months of 2021 due to a variety of Europe-wide factors. The consequence of this is that energy providers have pulled their long-term tariffs simply because they are unable to offer them at a competitive and guaranteed rate for any length of time.
Currently the cheapest plans are the ‘standard variable’ tariffs, which used to be 30-50% more expensive than the long-term plans. The standard variable tariff is price capped by the UK Government and is the standby tariff that is automatically selected when you first set up a gas or electricity account, or when long-term tariff contracts come to an end.
Assignees will be paying more
In hard-cash terms the impact of this crisis is that a typical UK consumer will be paying approximately GBP£140 per year more. Average Annual Bills will now be around £1300 p.a. There are no guarantees that these increases are the only ones coming down the line, and assignees should be budgeting accordingly. If you are paying an allowance for housing and utilities to assignees, you may wish to consider the impact of this rise on your assignee’s budgets, especially since assignees increases will undoubtedly be higher than a typical UK consumer.
What can anybody do to mitigate this? Not a lot right now, until the market stabilises and energy firms stop going bust. When new tariffs start to appear, we recommend you opt for or recommend to your assignees a fixed rate energy plan on a 1-to-2-year term contract, but only if the assignment is expected to last that long. Energy prices have risen continuously for 6 years so a long-term tariff will save money in the long run.
Reduced Choice
Another impact of the energy crisis is the reluctance for the big energy providers to take on new clients in the immediate future. This is because so many energy firms have gone into administration and the Government’s energy watchdog, Ofgem, is telling the bigger players to take on these accounts. This administrative burden has temporarily frozen or at least chilled the appetite for new clients swapping from another provider who is still trading. Shopping around isn’t the free-for-all it once was and choice is rapidly diminishing. Perhaps this will change in the future, but right now the advice is to sit tight and wait until options start appearing once again.
At HCR we will continue to work with our expert utility providers to ensure that when we set up accounts for our client’s assignees, they get the best possible prices.
If you have any questions on this subject or any other articles we post, please contact Adrian.Leach@hcr.co.uk