Energy price watch: changes to our energy prices
In our last update in December, we warned that we might have to increase our prices if wholesale costs didn’t fall. Unfortunately, the wholesale cost of energy is still high, so we now have to increase our prices.
We're increasing our tariff for the typical home by 2.8%. A typical home will see their annual tariff increase from £855 to £879 - a rise of £2 per month. Existing members will stay on their current rates for 60 days until 28th April. New members will start on our new rates straight away.
Since July 2017, wholesale energy costs have increased by around 11%. Government policy costs have also increased. These combined have added £63 to the annual energy bill of a typical home. We’ve managed to pass on a significantly lower price increase to members by reducing our own costs by £39. This is thanks to continuous innovation to help automate processes and build better self-service tools for our members. This means our price increase is only £24 for a typical home.
What caused wholesale costs to increase?
Continuing cold weather and high demand for gas in Asia mean wholesale electricity and gas prices are around 11% higher than they were in July 2017
Two acute events - the Forties pipeline crack and Baumgarten explosion - caused prices to shoot up in the short term but were quickly fixed last year
Earthquakes at Europe’s largest onshore gas field reduced its production capacity
Government policy costs and support for renewables have increased slightly
The two major events that we wrote about in December have been fixed. The Baumgarten gas station in Austria was brought back online in record time. And the Forties Pipeline in Scotland was reopened after repairs on schedule. So thankfully both of these events have not had a big impact on the long term cost of energy.
Unfortunately, the trends from before these events have remained. High demand for Liquified Natural Gas (LNG) in Asia, as well as a cold winter in Europe, have kept gas prices high. These two factors are the biggest cause of increasing energy prices. More recently, a stratospheric warming event has caused a huge area of arctic air to move over Europe, causing long-lasting, freezing temperatures. This means an unusually cold end to February and start to March. With higher heating demand, we see higher prices for gas. Gas prices are now 14% higher than they were in July last year.
And last month, the Groningen region in the Netherlands was hit by its strongest earthquake in five years. The 3.4 magnitude earthquake was caused by operations at the Groningen Gas Field, Europe’s largest onshore gas field, raising many questions about its continued operation, and leading to further cuts in its production capacity.
Electricity prices are now around 9% higher than they were in July 2017. This is largely driven by the change in gas price. The UK is still heavily dependent on gas-fired power plants for electricity generation. So, higher gas prices mean higher electricity prices too.
Renewables have become an increasingly large part of the UK’s fuel mix in the last year. This is great, but it means that there is an increased cost for renewable subsidies, which are paid for through energy bills. While this is a small additional cost compared to wholesale increases, these contribute to rising bills too. Remember, all energy generation gets subsidies, not just renewables. Costs related to the central infrastructure for smart meters have also gone up. These are paid for through energy bills too.
Our Price Principles
We’re committed to pricing fairly. That’s why we only have one tariff. We’ll always stick to our principles. If you think we’re straying away from them, let us know and we’ll take a long hard look in a mirror.
1. Just one tariff
We have one single tariff so if you’re with us, you’re always on our best deal
We don’t charge exit fees – you’re free to leave us at any point
2. Reflect the true cost of energy
We review our prices every week
When costs fall by more than £20 per year, so will your tariff
If they rise, we work hard to limit cost increases to you and we’ll always give 60 days' notice of a price rise
3. Radical transparency
We show how our tariff compares to all other suppliers on our homepage
We explain what we’re doing in plain English, not industry jargon
A real person is on hand to answer any questions you have
Why do wholesale prices affect Bulb?
We always buy 100% renewable electricity and 10% green gas. However, renewable generators will sell to whoever is prepared to pay for it (and rightly so!). This means that when fossil fuel prices go up, renewable prices go up too.
How did we do in explaining this?
No one likes a price increase, so we’ve tried to keep you in the loop as much as possible. Here’s what steps we took - how did we do?
- We sent an email to all of our members on the 18th of December explaining that we might have to increase our prices
- We let every new member since then know that we might increase our prices
- We’ve given all our members 60 days' notice from today. This is double what Ofgem recommends
- We write a wholesale market update every three months so that everyone can keep on top of energy news
Is there anything else that we could do to make price increases less painful in future? We've started a thread in the Bulb Community - let us know if you can think of anything.