A flood of cold air from Siberia caused severe weather conditions across Europe in the last weeks. The ‘Beast from the East’ along with Storm Emma triggered storage and supply issues that led to a significant spike of gas prices.
Demand for natural gas reached its highest level in twelve years. Gas for immediate delivery in the UK jumped to 190 pence a therm, more than three times the average price.
The cost of balancing Britain’s electricity market also soared more than three times.
The 20-year high for wholesale costs could raise household bills.
More countries struggle amid the severe weather conditions that killed at least 24 people throughout Europe. Prompt gas prices increased more than four times in the Netherlands.
Last year, the big six energy suppliers – EDF, E.ON, British Gas, Npower, SSE and ScottishPower – which hold around 80 percent of the market, saw over 1 million consumers switch to smaller companies.
This year, “independent suppliers are particularly vulnerable to extreme commodity price swings”, said Ahmed Farman, European equities analyst at Jefferies. Upswings in gas prices and pipeline closures will also affect customers who prefer independent providers.
Bulb, one of the biggest small suppliers, said it would increase one of its tariffs by £24 a year to £879 for a typical annual bill.
The big six have yet to establish higher fares.
A price cap on energy bills has been suggested by many, including Business Secretary Greg Clark, who said that a limit would “correct an intolerable situation” in which consumers have paid £1.4bn more than they would have in a competitive market.
The Domestic Gas and Electricity (Tariff Cap) Bill, which would ensure eleven million households are protected from unfair energy bills, would not run beyond 2023.
It would regulate a maximum charge, network costs and an acceptable level of profit, which would greatly benfit consumers who are looking to save on their household bills.
The cap will undergo further scrutiny. Ministers hope to have it in place before the end of the year.