Energy markets are currently in turmoil as a natural gas crunch hits Europe. Demand for gas is increasing across Europe, whilst the wholesale prices of gas has almost quadrupled in a year. This has ultimately impacted the worldwide demand for oil and coal. This has impacted millions across the UK, with energy bills increasing significantly. As a result, the UK Government has introduced the Energy Bills Rebate to support UK households.
What Is An Energy Crisis?
An Energy Crisis is defined as “any significant bottleneck in the supply of energy resources to an economy”. The current energy crisis in the UK has led to higher energy bills triggered by sky-high wholesale gas prices. It has led to the collapse of at least 28 energy suppliers, disrupted industrial plants and impacted household living costs.
Where Does The UK Get Its Natural Gas
In light of tensions with Ukraine and Russia, the UK sources only 5% of its gas from Russia. The EU however, gets half of its gas from Russia. It is estimated half of the UK’s gas supply comes from North Sea. The UK has produced gas since the 1960s but output has reduced, whilst usage continues to increase.
Approximately 1/3 comes via pipeline from Norway and the remainder from the USA, Trinidad & Tobago, Netherlands, Belgium, Qatar amongst others. The gas from these places is transported by liquefied natural gas by sea. The price of gas from these sources is linked to global market prices and can fluctuate significantly. Furthermore, the gas is sold to the highest bidder, with China having significant buying power.
Do We Have A Shortage of Gas In The UK?
The UK Government state the UK’s energy bill crisis is due to high global gas prices, rather than the security of supply, although there is a debate around this issue. The UK is fortunate to have a diverse supply of gas from secure suppliers, rather than say, Russia.
The UK has limited gas storage facilities, operating a model to meet current demand (just in time), rather than hold excess gas. This means the UK is particularly sensitive to short-term price increases.
If there was a real shortage of supply, the Government do have the authority to issue emergency measures. These may include getting large industrial organisations to stop using gas in the short term. The weather will have an impact, although is out of anybody’s control. We can only hope for a mild end to winter to reduce demand, and gusty weather to help alternative wind power energy.
Are Energy Bills Increasing?
Put simply yes. Energy Bills have been rising although they have been kept in check by the government’s price cap. The Energy Price Cap is the maximum a utility company can charge a customer per year for the amount of electricity and gas they utilise. The price cap has been reviewed and will rise by 54% on April 1st. It will increase from £1,277 to £1,971 for the average household. This is a significant increase of £693 per year for the average consumer.
This is compared to the last review in August 2021 led to a 12% increase of £139 per year. It is estimated over two million households will be plunged into fuel poverty without any financial help. This will mean six million people will struggle to have heating or power in their homes.
If things stay as they are, it is estimated the October 2022 Price Cap will increase a further 20%. There are no cheaper tariffs available, meaning consumers will struggle to shop around to get a better deal elsewhere. Comparison websites are feeling the squeeze too, with no cheaper deals to entice switchers.
What is the Energy Bills Rebate?
Each UK household will be eligible for £350 in savings. Rishi Sunak has announced £9.1 billion Energy Bills Rebate to support families with rising global energy prices.
All domestic electricity customers will get £200 off their energy bills in October 2022. The energy bills discount applies across England, Scotland and Wales. You will either have your bill reduced by £200, or you will be given a bill credit. If you are on a pre-pay it will be paid by your smart meter, or you will get a voucher or credit. This will happen automatically. From 1st April 2022, each household bill will increase by £40. This will be for five years to recoup the £200 discount.
Secondly, in April 2022, there will be a council tax rebate of £150 for 80% of UK households. This will be for households in tax bands A to D. If you are eligible, it will be processed automatically.
Thirdly, there is a £144 million pot for lower-income households to be used at the discretion of local authorities.
For more information on the Energy Bills Rebate, go to the Gov.uk website.
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