Households urged to act on bills as fire adds to leap in power costs

Households are being urged to protect themselves from a surge in energy costs ahead of winter as a fire at a crucial power installation adds to growing worries about affordability in the months ahead.

The blaze took out an electricity interconnector on the Kent coast – one of only two – which allows power to flow between France and Britain.

News of the fire sent day-ahead British power prices up by almost 19% at one stage – building on worries that the country faces an unprecedented spike in energy costs over the winter months and possibly beyond.

While National Grid, which operates the site in the village of Sellindge, insisted there was no risk of blackouts as a result of the fire, it admitted it could take a month for the link to be restored.

Low wind supply, simply because of unfavourable climatic conditions, and soaring wholesale gas prices have already forced National Grid to activate UK power station reserves by turning on coal-fired stations to keep the lights on this month.

Glenn Rickson, head of European power analysis at S&P Global Platts Analytics, told the Reuters news agency on the effect of the fire: “The outage is going to lift the potential for price volatility as long as its offline…. and of course demand will get higher as we move further into winter.”

Experts said it removed one gigawatt (GW) of interconnection capacity – only about 3% of UK’s daily needs – but when coupled with the wider energy crunch it painted an alarming picture and explained why wholesale electricity costs were running at record levels.

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Much of that is being put down to a shortfall in natural gas Europe-wide, with stocks of liquefied natural gas struggling to be replenished in time for the winter season following COVID disruption and a cold end to the last winter.

Tom Marzec-Manser, the lead European gas analyst at ICIS, told Sky News that wholesale gas October contracts were up 16% on Wednesday alone.

“The loss of French power imports means the GB market needs to generate an additional 1GW of power domestically.

“Given the lack of options, this means running yet more gas fired generation, even at these sky-rocketing (price) levels.”

Consumer groups have warned the increases, which have already forced four challenger household suppliers out of business this month alone, are being reflected in household bills ahead of a rise in the price cap on so-called default tariffs – also known as the standard variable tariff (SVT) – which comes into effect in October.

A particular concern is that rising living costs overall – which ramped up at their fastest pace on record in August – will accelerate further over winter and combine with the loss of two significant financial lifelines.

Gillian Cooper, head of energy policy for Citizens Advice, told Sky News: “This is going to be a tough winter for millions of people.

“Furlough is ending, Universal Credit is set to be cut, and many will see a jump in their energy bills as the price cap increases.

“The continuing rise in wholesale energy prices makes it hard to see light at the end of the tunnel, with bills likely to continue going up in the months ahead.

“Keeping the extra £20-a-week to Universal Credit is the single best way of supporting families through this difficult time. Ofgem can also play its part by providing extra funding for fuel vouchers for prepay customers,” she said.

Justina Miltienyte, energy policy expert at price comparison site Uswitch.com, warned: “Rising wholesale costs are putting a dangerous strain on suppliers, especially the smaller brands, and low prices are no longer an option for many suppliers who face a turbulent winter ahead to stay afloat.

“Now more than ever consumers need to stay engaged with their energy usage, and consider the best options available to them on the market.

“For some, remaining on a (SVT) might be the right option for now – but those customers need to be particularly vigilant and keep an eye out for any further price increases over the next six months.

“Fixed deals are still the best way to protect yourself from long term market volatility – and there are still deals available on the market where you can save money against the cap.

“Switching to a 12 month fixed deal now also means consumers will avoid the uncertainty of the next price cap, which will be announced in February 2022.”

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