With experts warning that the price cap could reach £7,700 next year, who is REALLY to blame for our rising electricity bills?
- From October bills will rise to £3,500 a year, but who’s to blame?
- The Kremlin’s cutting off gas supplies to Europe is the number one reason. Due to shortage of reserves, gas prices have risen sharply
- But before Putin, wholesale prices were already rising last fall due to Covid
Everyone is looking for a villain to bring to justice as bills rise to £3,500 a year from October and possibly double next year. Here consumer affairs editor Daniel Jones highlights the top ten culprits…
The Kremlin’s cutting off gas supplies to Europe is the number one reason. Due to the depletion of reserves, gas prices have spiraled. Since 70 per cent of electricity in the UK comes from gas, gas prices have also skyrocketed. The bills are most affected by wholesale prices for gas and electricity.
Due to the depletion of reserves, gas prices have spiraled. Since 70% of electricity in the UK comes from gas, gas prices have also risen sharply.
Before Putin’s intervention, wholesale prices had already begun to rise last fall. As the world came out of lockdown, demand for gas and electricity to power factories and offices jumped, but suppliers were still not operating at full capacity. Prices peaked in December but rose again after Christmas.
The regulator has been accused of supporting suppliers. He gave in to a number of demands, such as calculating the upper limit every three months instead of every six. Money-saving expert Martin Lewis and Age UK criticized elements of these changes, which one expert estimated added £400 to the typical bill.
Shell’s profits tripled in the first quarter of this year, while BP doubled. Harbor Energy, the largest producer of oil and gas in British waters, said last week that its profits were up 1,000%. These companies extract gas from underground – and a 14-fold increase in wholesale prices is a net profit.
Most vendors don’t make huge profits because the constraint limits their options. Some even lost money last winter when lockdowns kept prices low. But British Gas and Scottish Power are also energy producers, as are BP and Shell. These parts of their business are very profitable.
Liz Truss, a candidate for prime minister, and her rival Rishi Sunak have provided few details about how they will cut bills. Ms. Truss, as reported in today’s MoS announcement, is making it clear that she has a plan that he is willing to make public. But the delay is worrisome for millions of people who face bills that could total £7,700 from next April.
Ms. Truss, as reported in today’s MoS announcement, is making it clear that she has a plan that he is willing to make public. But the delay is worrisome for millions of people who face bills that could total £7,700 from next April.
The initial increase in wholesale prices last fall was partly due to a shortage of wind turbines in the North Sea. When it’s windy, other problems arise, such as restrictions on the transmission and long-term storage of renewable energy.
Wholesale prices for gas and electricity are set on the market, where prices are virtually the same throughout Europe. Whether electricity comes from wind, nuclear or gas-fired power plants in the UK, Germany or Spain, it costs about the same. The combined use of gas and electricity ensures supply during outages. And the benefits of this outweigh the benefits of being able to produce cheaper energy.
Green and social fees
About £120 of the £150 in so-called political bill spending is for environmental initiatives, with the rest intended to help the elderly or the poor. Some aspects relate exclusively to the environment and relate to wind projects. Others – such as isolation for poor people – help them lower their bills and reduce emissions. Discount on a warm house helps low-income families.
Bankrupt Energy Sellers
The costs of bankrupting 31 firms related to switching customers, repaying loan balances and paying for their overpriced energy purchases are shared among all households as part of a fee set by Ofgem. It is worth billions of pounds. Bust firms could not insure themselves against rising wholesale prices.