Why are energy prices rising?

Though the end result may be the glow of a lightbulb or the click of the kettle, the journey energy takes to reach your home is a long one that involves many people in myriad roles around the world. This means that the price of wholesale energy - the energy that we buy to supply your home - is prone to fluctuation.

While we - and most energy suppliers - will pass any savings on to our customers, and absorb rises in wholesale costs in order to keep things affordable for you, there are times where you’ll see an increase in what you’re paying. This is generally unavoidable, and as an energy supplier not something that we like having to do. Rest assured, however, that if our prices are going up, they’re going up across the board.

In the interests of total transparency, we’ve put together this blog post to explain how wholesale energy prices can and are going up currently and why the prices of our tariffs are going up with them. It’s worth mentioning here that you can lock in the prices that you pay regardless of fluctuations in the wholesale market for 12-24 months by signing up to one of our fixed rate tariffs. Again, in the interests of transparency, this can cost you more or less in some months depending on whether our costs go up or down, however it will be consistent and come with peace of mind and no surprises.

Why is the cost of wholesale energy rising?

The Guardian (please note, this article includes April 2021 price cap. October 2021 price cap is £1,277 per year)

The complex nature of storing and supplying energy means that there are a number of factors at play when it comes to how much it costs. A change in any of these factors - for example a shortage of gas or an unexpected disruption in supply - can impact how much we, and in turn you, pay for your energy.

The rising cost of wholesale energy compared to the cost of a tariff for the average So Energy customer

Currently causing the cost of wholesale energy to increase (this isn’t an exhaustive list, but some of the bigger drivers):

• An increase in demand as the country recovers from the effects of Covid lockdowns. Businesses are opening again, public transport is back to full capacity, people are back in the office and so on and so forth as vestiges of normality continue to return. All of this requires energy, and this has created a spike in demand that requires supply.

• A cold spring in Europe. As you’ll undoubtedly have noticed, spring this year didn’t trouble the mercury. Lower temperatures and less sunshine than expect - among other things - meant higher demands on stored energy, leaving less in storage to deal with the spike in demand outlined above, thus leading to higher prices.

• It’s been hotter elsewhere. While we experienced cooler temperatures in Europe, Asia experienced a hotter-than-usual summer. This, in turn, has resulted in higher demand for gas and electricity for cooling systems which, in turn, has also contributed to lower levels of available stored energy.

You might wonder why the above might affect a supplier of renewable electricity; surely more wind and sunshine is all we need? Not quite. Suppliers in the UK pay one price for wholesale energy, whether it’s renewable or not. On average, wholesale prices make up around 40% of what you pay, with our operations, system maintenance and regulatory costs accounting for the rest. Over the past 12 months, we’ve seen a more-than-3x increase in the cost of wholesale energy. As a consequence, the prices of domestic energy tariffs that we offer have, unfortunately, had to go up.

If you’re having a hard time keeping up with your energy bills for any reason, get in touch with us and we can discuss ways in which we can help. Please visit our help centre for more details.

You can be confident in us being here for you

You can be very confident that So Energy will be continuing to supply your property and provide our great service. So Energy has been one of the leading energy suppliers since we started in 2015 and we recently announced our merger with ESB Energy, which allows us to benefit greatly from their 90 years of experience in energy, as well as their strong financial standing. ESB is part of Ireland’s largest energy company, with a long track record in the energy sector, and is a strong, diversified vertically integrated utility with operations spanning electricity generation, transmission and distribution and energy supply. Over the past three decades ESB have invested over £2 billion in UK green energy infrastructure, and their leading history has been supported by an extremely strong financial foundations so you can be sure we will be here for you and continuing to provide our service.