If there’s one thing that all experts can agree on, it’s the fact that energy prices are no doubt going to rise in the wake of Britain leaving the EU. The question is, why and, more importantly, what does it mean for consumers?
Whether you voted to leave or remain, or even if you decided to not vote at all, the referendum to decide whether or not Britain will cut ties with the EU has had a far-reaching impact on everybody, with discussion of resulting costs being brought into the clear focus.
Energy prices have long been a widely talked about issue , given that they have been steadily rising over the last few years and despite being advised to always be on the lookout for a more competitive deal, consumers have been a little lethargic about acting. Now, however, with Brexit booms looming, more and more people seems to be ken to stem the flow of unmanageable household costs. Why IS Brexit set to make heating our homes and cooking so expensive though?
Why are people talking about an energy cost crisis and what exactly is that?
In simple terms, the UK needs businesses to be keen to invest in it, but this will only happen if the cost of commercial and industrial energy is kept at a fair level. This is problematic, given that the UK is second only to Denmark in terms of clean energy prices. Naturally, this has been investigated and experts have determined that the UK is paying a great deal more for clean energy than it actually should be. While this is worrying enough, there are also domestic concerns to consider.
Did you know that the UK imports up to 6% of its electricity from France, Holland and Ireland, collectively? Well, it does and more than that; almost half of all the gas reserves are piped in from Norway. With this in mind, it’s easy to understand why a messy break from the EU could result in a serious disruption of energy supplies, which could prove catastrophic for domestic consumers. With public confidence in the government looking shaky, at best, it’s little wonder that many people are starting to ask if we, as a country, are going to come out of the other side of Brexit unscathed, or bearing the brunt of huge energy costs.
Which factors are going to affect energy prices, post-Brexit?
Almost too many to count, if experts are to be believed, but let’s break things down and try to understand the most impactful and relevant issues facing consumers and their monthly energy costs.
Domestic energy policies – While being a part of the EU mans that individual countries have to commit to certain anti-pollution measures, domestic energy policies are generally made and maintained by member countries. This means that governments have a direct impact on costs that are passed onto consumers as energy prices, depending on the types of energy being invested in. A prime UK example is how nuclear energy is being invested in with new power stations, which are costing a vast sum. The construction costs have to be covered somehow, after all.
UK energy investment – Low-carbon energy initiatives are vital for the future, but they require significant investment, which usually comes from outside the country. With a severely reduced exchange rate making the Pound a high-risk commodity, investors will need to see significant returns on their money. This means increased costs, which will necessarily need to be covered by the energy companies looking into green futures technology. The UK government has a responsibility to try to negotiate profitable investment opportunities, as part of the Brexit negotiations.
Necessary energy improvements – Given how critical reliable energy supplies are, constant maintenance and improvements are being made to networks and grids, all of which costs money. A proportion of domestic energy users’ bills are already assigned to cover ongoing improvement costs, but these could be increased once the UK leaves the EU. While the country will no longer be held accountable to EU energy initiative goals, it’s likely that the government will want to make a stand and set new targets in place, which could have a big financial onset for customers.
With all of these elements taken into account, it stands to reason that domestic energy consumers can expect household energy bills to rise, at least in the short-term after Brexit has been finalised, but there is no way to be certain as to the final fiscal implications.
Who are the ‘Big Six’ and what do they say about energy prices?
The Big Six is a colloquial name given to the six major energy suppliers in the UK and they have been the focus of a lot of scrutiny for an extended period of time. With energy prices going up consistently over the past few years, there has been a lot of discussion about potential energy sector monopolies and unfair price hikes, but given the non-UK ownership of four out of the Big Six, discussions are seriously heating up now!
The Big Six are British Gas, SSE, EDF, Eon, Scottish Power and Npower, but out of these industry giants, only the first two are actually UK-owned. The rest are under German, French and Spanish ownership, which will obviously have an impact when Brexit finally happens, for real, though experts say that it is likely these large operations will be able to swallow more ongoing costs than small, independent energy suppliers, but there’s no taste in nowt, so they say, so be prepared for costs to rise, even if only nominally.
It should come as no surprise that consumers are interested to know exactly what the Bog Six see happening post-Bexit and to that end, they have been contacted numerous times to comment on whether their prices will increase in view of the UK leaving the EU behind. Interestingly, only Npower declined to address the issue directly, giving a ‘no comment’ response, while the other five jumped at the chance to try and allay consumer fears.
British Gas took a relatively honest tack, stating that EU energy market fluctuations will naturally have an impact on UK prices, but that it will try to look after the interests of both customers and shareholders. The other companies focused more on the importance of maintaining reliable energy supplies and continuing to invest in research that could lead to beneficial future technology and innovations.
Essentially, everyone has acknowledged that yes, energy prices ARE likely to increase, but in order to remain competitive, the Big Six, at the very least, are keen to make sure that standards don’t drop and that supply doesn’t become any less reliable.
Who is looking out for the consumer?
This is the big question. The UK media loves nothing more than a big, juicy scapegoat to put the blame on, which is why energy companies are consistently being vilified in emotive articles that chronicle the lives of cold elderly consumers. Unable to stay on top of their energy bills due to spiraling costs, vulnerable customers are splashed across the front covers of every tabloid newspaper, in a bid to name and shame ‘greedy’ energy companies, but this isn’t exactly helping the situation. Investigations into energy prices are being carried out by the relevant governing bodies, so who can the public look to, to help them with their energy increases? Themselves!
Taking the time to conduct regular price and tariff comparisons will help consumers to stay in control of their monthly expenses, regardless of how outside occurrences impact on specific industries. Think of this in more practical terms and you’ll see that it makes sense to do this yourself. If you see the same hairdresser every three months and suddenly, they charge you 20% more, you’d shop around for a cheaper professional, right? Well, you should be comparing your energy contract regularly too.
Energy prices are going to climb. Whether you stay on top of them and do what you can to minimise the impact on your household is up to you, but remember that it only takes a few minutes to input all of your information to get a real-time and accurate price assessment. Uploading regular meter readings will most definitely help with accurate price comparisons too, while also allowing you to see where you could cut back on your usage and save, as a household. A final tip is to always include smaller energy suppliers in your comparisons, as you could be pleasantly surprised by what they can offer.