The price of wholesale gas has surged by 70% since August and 250% since the beginning of the year, according to trade body Oil & Gas UK.
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Bills are set to increase to £1,277 for a typical user from 1 October and are expected to go up again in April to a record high of £1,455, meaning around 15 million UK households face a £178 annual hike to their energy bills.
This would mark a 14% increase on the October rise, which is £317 higher per year than current levels.
Why are wholesale gas prices soaring?
The price hike comes after the cost of gas on wholesale markets rocketed at unprecedented rates.
Many factors have been attributed to the rising energy prices, including the demand for gas increasing as the economy opens back up from the pandemic, the closure of several gas platforms in the North Sea to perform maintenance that was paused due to the Covid-19 outbreak, and supply from Russia drying up.
Cables that import electricity from France were also damaged last week and as September has not been a very windy month, it has meant more gas is needed to produce electricity.
The soaring prices has already caused several suppliers to go bust, including Green Avro, Utility Point and People’s Energy, because the unprecedented rises have meant customers are now paying suppliers less for energy that it is costing them to buy.
Should I switch to a new fixed deal?
Regulator Ofgem has warned consumers that the October rise will cost an average price increase of £135 this winter.
While many customers are locked into year-long deals with a fixed price for 12 months, those with a contract coming to end soon will likely have to change to a more expensive deal.
Consumer expert Martin Lewis has warned that some people who have previously fixed into cheap energy deals may see their bills surge by as much as 40% when they come off them.
He suggested that, based on the “current run-rate”, the price cap from 1 April may potentially be more than £1,500 a year, based on typical usage, and said consumers may be better off avoiding switching to a new fixed deal.
He said: “As I never thought I would say, one option is prices have gone up so much the price cap is now not a bad deal for the next six months and you get six months of protection.
“But you could bide your time and cross your fingers and wait and just go onto the price cap when your current deal finishes… because it cannot go up until April 1.
“The second option is to try and lock into a one or two-year fixed rate.
“Now, there are still a couple of tariffs out there where you can lock in for a year or two years at below what the price cap will be on October 1. They offer protection if things do not get better.
“Everybody needs to understand you will be paying more for your energy. This is not a question of saving money, this is a question of reducing the rise.”
Mr Lewis also advised consumers to go onto their supplier’s website and take a screenshot or their credit balance every week.
He said: “That’s because they will take the site down if it collapses and you may find you need evidence of your balance to carry it over to your replacement supplier.”
How can I save energy in my home?
As well as checking the market for the cheapest deals, here are some simple energy saving steps you can take at home to help minimise your gas and electricity usage and cut down on costs.
Turn off appliances
Turning off appliances at the plug can save £30 per year on average, according to MoneySuperMarket.com.
Use a smart thermostat
Smart thermostats learn how long it takes to heat your home and will only warm the rooms that are in use, making your energy consumption more efficient and giving you a saving of around £75 annually.
Turning your heating down by one degree could also help you save up to £80 per year.
Use water more efficiently
Washing your clothes at 30 degrees instead of 40 will help to reduce your energy usage, while cutting out one wash cycle per week could reduce your annual bill by £5.
Additionally, washing dirty plates in a bowl rather than under a running tap can make you a saving of £25 per year, while investing in a more efficient shower head can save you around £18 per person each year.
Invest in double glazing
Double glazing will help to insulate your home from the cold, meaning you are likely to make savings on your heating bill.
A single glazed semi-detached home could save as much as £110 per a year by installing double glazing.
Draught-proofing your home will also cut down on your heating bills, so it is worth investing in draught excluders and sealing any cracks in the floors and skirting boards to minimise cold air coming in.
Insulate your roof
Insulating your loft can be costly but it will pay dividends once it is done, potentially cutting around £135 per year off your energy bills.
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