This has been an extraordinary year for the UK energy market. Millions of customers saw their prices soar, while the UK lost half its suppliers.
Large providers like Bulb were affected by chaos when the government placed them under special administration.
As wholesale costs rise across the board, it is expected that prices will keep rising in the new year.
This is Money looks at the origins of the crisis and how prices have risen. It also reveals what to expect for 2022.
With prices climbing for many, this was one of the most significant changes in the energy market.
How did this energy crisis start and what are its causes?
August saw the onset of the crisis. Although there were many causes, the crisis was ultimately caused by lack of natural gases being produced and an increase of demand.
Although demand recovered faster than expected following the pandemic worldwide, there was a slow recovery of reserves. Russia had a lower supply than we anticipated.
This was due to the cold and prolonged winter of 2020-2021.
The output of renewable energy sources like solar power, wind and other forms was lower than expected. This led to a greater dependence on natural gas.
Which bills have gone up the most?
As a consequence, wholesale prices began to rise and gas suppliers were being charged more.
In turn, they had to increase the prices of their customers to pay for these extra expenses.
Many had hedged their risks and purchased enough supplies for one year ahead of time, so they could continue to serve their customers. However, this was not the case with other suppliers.
They were then being charged a higher rate than they could afford.
Since August, 25 of the 50 suppliers on the market have gone bankrupt.
Customers are left without options for switching providers.
Standard default tariff customers are still subject to the price cap, which means they have better prices than new fixed tariff customers.
Ofgem introduced the cap in January 2019 to help customers keep their prices low.
At present, suppliers are unable to charge more than £1,277, the level that was introduced at the last review in October 2021.
Whilst this is good for default tariff customers, despite being the highest cap yet, it meant some suppliers were paying more for the energy than they were charging and losing money.
Now customers coming off fixed deals onto new ones have found their estimated bills are increasing by hundreds of pounds with many reporting their annual bill is expected to reach over £2,000 – a massive jump.
Although it’s not yet known how energy prices will change in 2022 experts believe they may rise.
Customers can save money by changing providers
At the moment, most people are advised to keep to a default tariff because it is not capped at Ofgem.
The price cap is currently at its highest level of £1,277 – a jump of £139 from the previous cap – but this is still much cheaper than many fixed deals on the market.
Because the level of energy is set at a per-unit rate, households must still watch their consumption if they wish to reduce costs.
The cap is also expected to increase when it is reviewed in April, with many experts expecting it to rise by around £300.
Long-term customers on fixed deals are likely to be the most secure as they won’t see their prices change.
However, those who are currently on a fixed-rate contract may prefer to join a default tariff and wait to see whether it rises in April to avoid signing up for a higher fixed rate.
Alex Hasty is an associate director of Compare the Market. He stated that fixed tariffs are generally more costly than default and variable tariffs in most cases.
“We encourage people to carefully compare deals before they make any commitments at this time. We clearly communicate this message via our website before anyone starts a comparison.
“As a general rule, it’s better to remain on a default/variable tariff than choose a fixed-rate alternative right now, since you’ll be covered by Ofgem’s energy price caps.
We have made it a point to present all the tariffs that we offer on our website.
People should be vigilant about Ofgem’s next price adjustment. They will announce it at the beginning in February 2022. The increase is likely to continue, which may further affect energy bills as of the first of April 2022.
Fears: In the New Year, many homeowners will worry about their rising energy bills
Is the crisis going to be solved by 2022?
This is likely to be a problem for quite some time.
However, bills are likely to remain high through the beginning of the year. They will also continue rising if the price caps increase as anticipated in April. The price cap will not be reviewed until October 2022.
Money talked to many experts. All of them said that customers should expect additional problems over the course of the year.
Justina Miltienyte is an energy policy expert. UswitchAccording to a report by, consumers will feel a lot more pain when their energy bills go up starting in April.
It is important to make sure that the greatest number of people in most need are supported.
“Unfortunately we have not seen the end to this energy crisis. But, concerned consumers can feel safe in knowing that their energy supply and credit scores will be maintained even if more suppliers stop trading.
We can expect another half a dozen suppliers to go out of business within the next month or so
Mark Bennett, Energy Helpline
“If your supplier leaves the market and you feel affected, do not act until Ofgem assigns a new provider.
“Wait until the dust settles on the present situation before you look for better deals elsewhere.
“Customers are advised to take note of their meters readings and call their supplier again when they contact them, in order to verify that their bills reflect the correct information.”
Mark Bennett, energy expert at Energy Helpline“The hard truth is that the market remains volatile and we can expect more than half a dozen suppliers going out of business in the coming month, while the entire sale market continues seeing record prices.”
‘This will, unfortunately, mean that much higher energy prices are coming for consumers, with the current estimate for the next price cap to be over £1800, an increase of around £550, due to come in April.
“Given how volatile the energy market was over the last six month, it is hard to predict what will happen in next year’s second part. And while energy costs tend to go down in warmer summer months, the current trends don’t suggest that this will bring relief for households’ bills in 2022.
Experts warn that the bills will rise even further in 2012, according to a number of sources.
Energy market analyst spokesperson Cornwall InsightAccording to the report, “Suppliers are currently under great pressure right now. This has increased this week because gas prices have reached all-time highs.”
‘As a result of the continued increase in gas and electricity wholesale prices, Cornwall Insight’s forecast of the default tariff price cap has risen to approximately £1,800 per annum for the summer 2022 period – this figure excludes the impact of recent energy supplier failures.
The wholesale market is experiencing increased volatility due to concerns about energy supplies availability in the winter, and other geopolitical issues which could affect European gas supply.
‘At the same time, question marks remain over how and when the costs from recent supplier exits will be recovered from bills, with our initial estimates indicating that this could add more than £100 to our above cap forecasts.’
Who can help those who are struggling with their bills?
There are many options available to households that are having trouble paying their energy bills, despite the dire warnings about rising bills.
This includes the Warm Home Discount, which provides eligible households with a £140 discount on their bills – but numbers are limited so customers are encouraged to apply quickly before spaces run out.
For those receiving the state pension, or any other social security benefit, winter fuel payments are available.
Cold Weather Payments will be made to anyone whose area’s average temperature is below zero celsius for seven consecutive days.
Households will get £25 for each seven day period of very cold weather between 1 November and 31 March.
Miltienyte adds: ‘Devices such as smart meters can help you keep track of how much energy you’re using in real time, in pounds and pence, and can be useful for budgeting.
“It’s worth considering ways to increase your energy efficiency throughout winter. This includes purchasing draft excluders, clearing out obstructions from radiators, and applying for insulation grants.
People who are struggling to pay their energy bills should contact their supplier for assistance. You could also set up a payment schedule.