In case you missed it, soaring prices have caused an energy crisis across the UK, including rising costs for energy providers, businesses and individuals alike.
The ripples are being felt nationwide, but how will the private rented sector be affected by the price surge? And what can agents do to mitigate risk in the meantime?
How bad is the crisis?
To put things into perspective, “Goto” recently became the 13th energy supplier to go bust since August 2021, just a week after similar collapses for other providers including Pure Planet, Colorado Energy and Daligas—affecting over 2 million customers around the UK.
What happened to the price cap?
The energy price cap—the maximum price suppliers can charge customers on a standard (default) tariff or a prepayment meter—has been raised with effect from 1st October. This means the average household now faces bills of over £1,200 per year for their energy.
And that’s only held until April 2022 when the price cap could rise again. Research firm Cornwall Insight has said energy bills could rise by up to 30% in 2022 if price surges don’t slow or more energy suppliers go bust, which drives the average up to just over £1,500 per year.
Many smaller suppliers won’t have deep enough pockets to buy the gas they need to provide for all individual households—hence the fear that even more suppliers will fold before the crisis eases.
What’s the worst case scenario?
This could go on for some time.
85% of the UK’s domestic heating comes from natural gas, so most UK households will be affected, and bills are projected to rise by at least 10% in the coming months.
The Joseph Rowntree Foundation has found that up to 30% of households earning less than £25,000 per year have faced serious difficulty paying their bills since the pandemic—and this number will only rise as energy prices soar.
Meanwhile, Keith Anderson, CEO of Scottish Power, says households could face up to 18 months of consistently rising energy bills, and that even well-run energy suppliers face the risk of going bust.
What happens if your tenant’s supplier goes bust?
In this situation, the property will automatically be assigned a new supplier (on their lowest available tariff). Any outstanding credit will be transferred to the new supplier, and the tenants won’t be charged any exit fees for leaving the original supplier.
If your tenants don’t want to choose their own provider, they are free to switch without penalty but OFGEM has recommended customers wait to be contacted by the new supplier before looking to switch.
What can agents do to support tenants and landlords?
Encouraging your tenants and landlords to compare tariffs is a good starting point, even if they are thin on the ground at the moment. It may be worth looking for a fixed-price contract that is immune to price changes for the next 12-24 months, as there’s no knowing how high prices will go.
For landlords, if their properties are vacant it’s a good idea to talk to them about switching to a Void energy tariff, which includes waivers such as free standing charges to help keep their bills as low as possible.
Meanwhile, tenants have a number of grants and subsidies available to them over the winter months if they are struggling to keep up with their energy bills. Let them know that these resources are there if they need them. Clear communication with your clients will be more important than ever during this turbulent time.