Energy price watch: our prices are going up
In our last update in May, we warned that we might have to increase our prices and, sadly, we do. Wholesale energy costs have increased by 21% since February.
We're increasing our tariff for the average UK home by 5.1%. The average home will see their annual tariff increase from £879 to £923 - a rise of £4 per month. Existing members will stay on their current rates for 60 days until 12th August. New members will start on our new rates straight away.
We still think our tariff represents really good value. We’re £261 cheaper than standard Big Six plans. And we don’t do exit fees, so members can leave at any time with zero cost.
Wholesale energy costs have gone up
Since February 2018, wholesale energy costs have risen substantially. We’re trying to keep this increase as low as we can so we’ve limited it to £45 per year for a typical home. If wholesale prices remain high, we might need to raise our prices again. As ever, we’ll stick to our Price Principles.
What caused wholesale costs to increase?
Wholesale energy costs are now 21% higher than they were in February 2018 (Gas is up 22% and electricity is up 20%)
A cold winter and reduced gas production capacity left gas stores depleted at the start of Spring
Demand for injection into storage has kept the price of gas high even as we head into Summer and are using less gas
Storage levels are still behind where we’d like to be at this time of year, keeping demand for gas high
Wholesale gas prices are now 22% higher than they were in February.
In our last update in May, we explained that Gas storage levels were their lowest in at least five years. As a result, the demand for injection into gas storage has been much higher than normal and looks like it’ll remain high for the rest of the summer. This has led to sustained increases in the wholesale cost of gas.
The cost of gas rose throughout March and April, peaking in May. High prices saw an increase in gas heading to Europe from Russia. Shipments of Liquified Natural Gas (LNG) to Europe also increased as a result of high prices. Injections into gas storage increased during this time.
At the same time, we’ve experienced a warmer start to Summer than normal. This year, the UK saw the warmest April day since 1949 and the hottest May Day bank holiday on record. The warmer weather conditions have made it easier to continue injecting gas into storage and we’ve now gone someway to overcoming the large deficit in storage facilities.
While we’re beginning to catch up, storage levels are still behind where we’d like them to be. This means that the wholesale cost of gas could remain high a while longer.
Electricity prices are now around 20% higher than they were in February 2018. 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. With more renewables being put onto the grid, this will decrease the UK’s reliance on gas-powered electricity.
Our Price Principles
We don’t like doing price increases. And we’re sad to be doing our second this year. We much prefer a decrease. Since Bulb was founded in 2015, we’ve dropped our price seven times and this is only our third increase. We’re committed to pricing fairly. And we’ll always stick to our principles. If you think we’re straying away from them, let us know.
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. We 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 10th May 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? Let us know in the Bulb Community if you can think of anything.