Tuesday, March 28News For London

Why are electricity and gas prices going up and what can be done?- Fuel rises explained

The average household is expected to see a 54% increase in their gas and electricity bills in 2022. This is around £693 per home with the average household paying an annual bill of  £1,277,  it’s expected they will pay £1,971 this year. 

People using prepay meters are expected to see a price increase of £708 during 2022 with their bill going from £1,309 to £2,017. 

Each year there are two price caps set for energy bills in the UK. These caps are set by the regulator Ofgem. The new cap was set on February 7th but won’t come into place until April 1st.

Why has the bill gone up? 

  • Low levels of wind during the summer of 2021 meant that the UK saw a massive decrease in wind turbine energy.
  • The amount of gas Europe has stored decreased a lot after there was a rise in usage during the winter of 2020- 2021.
  •  Gas wholesale prices have steadily been on the rise since April 2021

Ofgem has reported historical low gas supplies in the UK during 2021. Many countries have had to dip into emergency supplies of gas but just months ago had double the amount they currently hold in supplies. For example, France just 3 months ago had four times the number of gas supplies in comparison to now. In short, when supplies are low but the usage stays the same then the prices must rise.

Another important factor in the energy price rise in the UK is the war in Ukraine. Russia was responsible for supplying 5% of the UK’s gas but over 40% of the fuel for the European Union which accounts for more than any other supplier.  Fear of Russia cutting off its fuel supply encourages panic buying which unfortunately also hikes up the prices of gas. The EU is looking toward becoming more independent of Russia but this will be a very long process. 

In recent years more Asian and South American countries are buying energy supplies from the same sources as the UK in the effort to transition from using coal to fuel their countries to using gas. With an increase in demand in other countries, the UK has seen a 19% decrease in imports. 

We also had a very long and cold winter this year. In April 2021 the Uk reported its coldest winter since 1922. Countries across the EU reported longer winters from 2020 to 2021 with the EU reporting the coldest winter since 2003. This is most likely a result of climate change. 

Energy suppliers are also closing down at record speed after going bust. In 2021 it was reported that 27 different energy companies had closed after there being 70 before in the UK. Some of the UK’s biggest firms have shut down over the last few years. Bulb, which was the UK’s sixth-biggest energy supplier went into ‘special administration’ in 2021 leaving 1.7 customers without a supplier. 

Another industry hard hit by the rises in gas prices is electricity. The prices of electricity have risen by 268% over the last 12 months. The price rise is because gas prices hiking up. Gas plants in the UK directly supply 35.7% of the UK’s electricity and a rise in the price of gas has a knock-on effect on the electricity industry. Lack of gas means a lack of electricity.