How The Russian Gas Crisis Could Affect You
As freezing temperatures sweep through the nation, has the energy war in Russia left us all out in the cold? And will we be faced with higher energy bills?
It was just a glimmer of a hope, but it was a hope all the same. Scottish Power's recent decision to cut the cost of one of its fixed-rate gas products by 10% led to speculation that other suppliers would quickly follow suit.
Lower energy bills at last, perhaps? But alas, it was not to be.
Amid an energy dispute between Russia and Ukraine, Russia decided to cut off all gas supplies to its neighbour, causing major supply disruptions across Europe. And leaving us all to wonder what impact it will have on us.
Just three years ago, Russia and Ukraine were caught up in a similar gas row which lasted four days and resulted in utter turmoil for European gas supplies. Worryingly, the current dispute has already lasted longer than this.
Gas markets have reacted nervously to the latest news, and wholesale prices have started to rise. This, in turn, could affect how much we pay for our energy in the UK.
What will happen to our energy prices?
Much will depend on how long the dispute lasts. The longer it drags on for, the slimmer the chance of lower gas and electricity bills. After all, the row provides a convenient excuse for utility providers to hold onto their margins and keep prices high.
Some utility providers had previously indicated that energy prices would start to come down in the new year. But this was conditional on further, sustained falls in the wholesale price of energy, and that's now looking less and less likely.
While I don't think prices will go up, any move by suppliers to lower their prices is now likely to be postponed. Exactly how long this delay might be is anyone's guess, but I don't think we'll see any change until the spring at the very earliest. Even then, price cuts may not be as great as initially hoped.
Energy Secretary Ed Miliband has tried to offer some reassurance, reasoning we shouldn't worry about our gas supplies as they can be obtained from a range of sources.
But even if our supplies aren't affected, wholesale prices may still go up, preventing energy providers from lowering their prices.
What can I do?
At a time when freezing temperatures are plaguing the country, the prospect of energy bills remaining high is the last thing any of us want to hear. With energy usage on the up as we try to stay warm, many of us will be getting a nasty surprise when the next bill lands on the doormat.
But don't despair yet. By following a few simple steps you can still help reduce your exposure to high prices.
Firstly, look into switching your supplier to make sure you are getting the very best deal on your gas and electricity. And do it now -- don't sit and wait, nervously biting your nails, hoping prices will come down in the next month, because they probably won't.
By using a price comparison service such as the Fool's gas and electricity tool you'll be able to research a wide range of different tariffs and find one that suits you. Believe it or not, there are still some attractive rates out there, and switching your deal could result in your pocketing an extra £200 a year.*
Even if you have recently switched, it's still worth regularly checking whether you can get a better deal elsewhere. Utility providers are not your friends and won't reward you for being loyal. They'll offer the best deals to new customers, not existing ones, so make sure you're always getting the best deal available.
It's also important to check that your energy bills show actual, rather than estimated, meter readings. If you do have an estimated reading, phone your supplier and ask if you can provide a customer reading. The supplier should recalculate your bill based on this and re-issue it.
Taking measures around the home to reduce your energy usage will also save on the bills. For further tips on this you can check out Eleven Clever Ways To Cut Your Energy Bills.
What about capping?
For anyone concerned their energy bills might continue to rise, capping your tariff can provide some reassurance. By opting to do this, you'll be locked into fixed prices (charged per unit of energy) for a finite period.
However, you will have to pay a premium to do this (10-15%) and right now, I don't believe capped tariffs represent a good deal for energy customers. Wholesale prices have fallen around 30% since last summer, so unless they bounce up again significantly, there's still a chance energy prices will come down at some point this year. And that means if you're locked into a set price, you'll miss out on lower prices.
So although I'm not too hopeful gas and electricity prices will be reduced any time soon, I'm not ruling it out altogether. But in the meantime, it looks like we have a very cold winter to get through. So don't delay, switch to a better deal today and ride out the storm in style!
*on average, according to our data.