Wholesale energy prices have rocketed to 11 times above normal levels – a fresh record high – and higher costs are set to be passed onto consumers.

It has therefore never been so important to review your energy provider and lock in a good deal for the winter, but options are quickly running out as energy firms go bust and cheap tariffs disappear.

Here is everything you need to know about the energy crisis and how to get the best deal.

Why are energy prices going up?

Demand for natural gas has spiked as the world comes out of Covid-19 lockdowns and economies reopen, which has caused prices to rise. High demand in Asia for liquified natural gas, natural gas transported globally by ship, means less LNG than expected has reached Europe.

The wholesale day-ahead power price in Britain rocketed to £540 per megawatt hour last week – more than 1,000pc above the average over the past decade. Gas reached an all-time high of 151p per therm, compared to around 40p per therm a year ago.

In Britain, where wind power makes up around a quarter of our energy supply, low winds have meant that less energy has been generated. The problem has been exacerbated by nuclear power station closures, made worse by a fire at a substation in Kent which cut off power supplies from France.

What effect is this having?

Wholesale energy costs make up around 40pc of household energy bills, so this is putting pressure on energy companies to raise prices in order to stay in business, and the Government to increase the energy price cap, the most providers can charge households on variable tariffs.

Energy regulator Ofgem increased the price cap by £139 to £1,277 last month in response to rising wholesale costs, with the new cap implemented on October 1. Analysts at HSBC said the cap could be raised by £192 when Ofgem reviews it in February.

Many smaller energy firms have been squeezed by the supply issues. Two energy suppliers, Utility Point and People’s Energy, ceased to trade. The two firms had over half a million energy customers between them. In total, seven energy suppliers have ceased operations so far this year. Larger firms have enough of a financial buffer to survive the price spike.

Other energy firms are pulling tariffs from the market that no longer make sense financially. There are now just nine tariffs on comparison site Go Compare – four dual and five electric-only – from four providers on its website. This is an 89pc decrease on normal levels.

What happens if your firm goes bust or is taken over?

There is no reason to panic If your supplier goes bust. Ofgem will switch you to a “supplier of last resort” and any credit with the older energy provider will be transferred across.

Affected households should take meter readings as they will need to pass these on to their new supplier. There is no requirement to stay with a supplier of last resort but customers should wait until their account is set up and any credit is transferred before switching.

How can you get the best deal?

If you are on a fixed-term deal then you are protected from the increase in price. After your deal expires you will be moved to the company’s standard variable tariff, which is limited by the price cap.

Comparison site Which? said while there were limited fixed-deals available that would beat the price cap, it was still worth checking out comparison sites if your deal was due to expire in October.

Martin Lewis of Money Saving Expert said it was best to let your current deal expire before locking in a new tariff.

"If you're on a cheap fix or even a cheap variable tariff where you know you've a few months left, my best guess is inaction right now will win. Prices have risen so much that the savings you'll make by sticking with your old cheap tariff, while it lasts, will be huge," he said.

GoCompare said the best deals could be found on energy company websites directly as it did not have enough tariffs on its own site to save households money.