Households across the UK have received notice from their Energy Suppliers about price increases, and how much more they will pay from April.
On Friday evening, social media erupted with both British Gas & Bulb Energy topping the trending page due to shock from customers receiving emails detailing these price rises.
Energy suppliers are required by law to notify their customers about price increases with a “reasonable” amount of time. The price rise, what it implies financially for the consumer, and when it takes effect should all be included in this.
Customers on British Gas‘s capped tariffs will pay 28p-30p per kWh for power from April 1. Electricity will have a daily standing fee of 45p-51p, while gas will have a daily standing charge of 27p-37p. Both Bulb & Shell Energy sent out a letter to consumers this week setting similar rates, while EDF said earlier this month that its pricing will rise to match Ofgem’s price cap.
One customer expressed their shock when receiving the news that their energy bill would be increasing from £248.20 to £456.91, almost a 100% increase.
The energy regulator, Ofgem, announced the new pricing caps last month, warning that the average household will pay just under £2,000 each year for their energy and gas, a 54 percent increase.
To offset this, the government pledged a £150 council tax rebate to individuals who live in bands A to D, which covers around 80% of families. From October, another £200 will be deducted from energy bills, but households will have to pay it back in instalments until 2023.
Why is this happening?
This all comes after a squeeze on wholesale gas prices across the world, A worldwide squeeze on energy supplies has pushed the price of gas prices up to unprecedented levels. A harsh winter in Europe put strain on supplies and limited the quantity of gas stored; a windless summer in 2021 made it impossible to create wind energy; and growing demand from Asia, particularly China, put strain on liquefied natural gas supplies.
The UK is relatively hard-hit because about 85% of homes have gas central heating, and gas generates a third of the country’s electricity.
Following reports that Russian soldiers had invaded Ukraine on Thursday, wholesale gas prices increased by 28%. if these trends continue, Ofgem will have to raise prices again significantly when the cap is reviewed in the autumn. This might result in annual gas and electricity costs of more than £2,500, which will no doubt be a futher burden on households going into the winter.
Even without the effect of the Ukraine crisis, bills were looking set to rise by another £400 a year.
EU Leaders Agree on New Energy Sanctions for Russia
In response to Moscow’s military invasion of Ukraine, the European Council, which is made up of EU leaders of state and government, said on February 24 that further sanctions targeting Russia’s energy, transportation, and other sectors had been agreed upon.
In a statement following a meeting in Brussels of EU leaders, the European Council said it had reacted “swiftly and decisively” to Russia’s actions.
“The European Council today agrees on further restrictive measures that will impose massive and severe consequences on Russia for its action, in close coordination with our partners and allies,” the council said. “These sanctions cover the financial sector, the energy and transport sectors, dual-use goods as well as export control and export financing, visa policy, additional listings of Russian individuals and new listing criteria.”
While the specifics of these measures have yet to be revealed, many people are questioning what the best route to go down is when deciding energy sanctions for Russia, due to the EU’s dependability on Russia for Gas.
We have already seen the announcement made last week that the controversial Nord Stream 2 gas pipeline would no longer be granted Certification.
Chancellor of Germany said “This sounds technical, but it is the necessary administrative step so that no certification of the pipeline can now take place,” Scholz added. “And without this certification, Nord Stream 2 cannot go into operation.”
President Biden also weighed in, after re-assuring Scholz that if Russia further invaded Ukraine he would make an effort to stop this from going ahead, which ultimately happened.
He stated: “Today, I have directed my administration to impose sanctions on Nord Stream 2 AG and its corporate officers. These steps are another piece of our initial tranche of sanctions in response to Russia’s actions in Ukraine. As I have made clear, we will not hesitate to take further steps if Russia continues to escalate.”
Alternatives for Gas have been suggested, with one being the introduction of LNG, and the head of NATO has called on Europe to begin diversifying its Energy Supply.
According to EnergyLiveNews, A majority (79%) of Germans want to gradually ensure their country is independent of energy imports from Russia. Germany currently imports more than half of its natural gas from Russia – the government seeks to reduce this and make greater use of other import options in the future.
This all comes as wholesale gas prices spiked a whopping 28% following reports that Russian soldiers had invaded Ukraine, posing the question, with the world already facing enormously high gas prices, what would the impact be on the rest of the world if harsher Energy sanctions were to be announced?
It is likely that wholesale prices could increase even further, pushing households into more discomfort. In the UK, households are already facing a huge rise in bills as the Energy Regulator Ofgem announced a rise in price cap.
We could also see further Energy Suppliers going bust. A number of energy providers have already gone out of business as a result of pre-existing pricing difficulties, with customers expecting annual increases of up to £700 beginning in April.
Germany Set to Build 2 LNG Terminals
Germany will build two liquefied natural gas (LNG) facilities, according to German Chancellor Olaf Scholz, who pledged to do more to protect the countries energy supply and lessen its reliance on Russian gas.
Russia’s largest gas consumer is Germany. It has previously been reported that Europe imports 35% of its natural gas from Russia, with Germany accounting for over 50%. However, in the wake of Russia’s war on Ukraine, Germany, along with other European countries, has been trying to increase LNG imports and diversify their energy supply.
As informed, the LNG terminals are planned to be located in Brunsbüttel and Wilhelmshaven. Currently, there are several liquefied natural gas terminals in Europe, however, none of them are located in Germany.
LNG was floated as an alternative to Russian Gas by the EU Commission President at the start of February:
“Even in case of full disruption of gas supply from Russia, we are on the safe side for this winter,” she stated. ”For the time being we would be able to replace the Russian gas with LNG [liquefied natural gas] deliveries that we get from our friends all over the world.” “In the middle to long-term, we are doubling on renewables. sun, wind and hydropower will increase European independence on energy.”
LNG is already widely used in Europe, accounting for roughly a fifth of the region’s natural-gas imports. One question is how much more of the material can be processed by Europe? To be transported, LNG must first be converted to a liquid; it must then be “re-gassed” at terminals, generally along the coast, before being used to heat and power houses.
In reaction to the situation in Ukraine, Germany paused the process of certifying the Nord Stream 2 gas pipeline from Russia last week. Construction on Nord Stream 2 was finished in September 2021, but the project still needs German regulatory approval before gas deliveries can begin.