As experts warn price cap could hit £7,700 next year, who is REALLY to blame for our soaring energy bills?
- Bills are set to rise to £3,500 a year from October – but who is to blame?
- The Kremlin cutting supplies of gas to Europe is the No 1 reason. By starving supplies, prices for gas have spiralled
- But before Putin, wholesale prices were already rising last autumn due to Covid
Everyone is looking for a villain to hold accountable as bills are set to rise to £3,500 a year from October – and possibly double that next year. Here, Consumer Affairs Editor Daniel Jones puts the spotlight on the ten leading culprits…
Vladimir Putin
The Kremlin cutting supplies of gas to Europe is the No 1 reason. By starving supplies, prices for gas have spiralled. Since 70 per cent of UK electricity comes from gas, prices for that have soared too. Wholesale gas and electricity prices have by far the most effect on bills.
By starving supplies, prices for gas have spiralled. Since 70 per cent of UK electricity comes from gas, prices for that have soared too
Covid
Before Putin’s intervention, wholesale prices had already started to rise last autumn. As the world came out of lockdown, demand for gas and electricity to power factories and offices jumped – but suppliers were still not fully up and running. Prices peaked in December – but then rose again after Christmas.
Ofgem
The regulator has been accused of siding with suppliers. It has given in to a string of demands, such as calculating the cap every three months rather than every six. Money-saving expert Martin Lewis and Age UK have criticised elements of these changes, which one expert estimated added £400 to a typical bill.
Energy producers
For the first quarter of this year, profits for Shell tripled – and for BP they doubled. Harbour Energy, the biggest oil and gas producer in UK waters, last week said profits were up 1,000 per cent. These companies extract gas from the ground – and the 14-fold rise in wholesale prices is pure profit.
Energy suppliers
Most suppliers are not making huge profits, since the cap limits what they can make. Some even lost money last winter when the cap kept prices low. But British Gas and Scottish Power are also energy producers, like BP and Shell. Those parts of their businesses are very profitable.
Politicians
Liz Truss, the frontrunner to be PM, and rival Rishi Sunak have both given few details on how they will cut bills. Ms Truss, as reported in today’s MoS, is clear she has a plan ready to unveil. But the delay is causing anxiety among millions facing bills that could hit £7,700 from next April.
Ms Truss, as reported in today’s MoS, is clear she has a plan ready to unveil. But the delay is causing anxiety among millions facing bills that could hit £7,700 from next April
Lack of wind?
The initial rise in wholesale prices last autumn was caused in part by a lack of wind to power turbines in the North Sea. When it is windy, there are other problems such as constraints in the transmission and long-term storage of renewable power.
Europe-wide market
Wholesale prices for gas and electricity are set on a market where the price is pretty much the same across Europe. So whether electricity is from wind, nuclear or gas-fired power stations in UK, Germany or Spain, it costs about the same. Sharing gas and electricity ensures supply during outages. And the benefits of that outweigh those of being able to produce cheaper energy.
Green and social levies
About £120 of the £150 for so-called policy cost on bills is for green initiatives, with the rest earmarked to help the elderly or poor. Some aspects are solely environmental, going towards wind projects. Others – like insulation for poorer people – help them lower bills and cut emissions. The warm home discount helps low-income households.
Failed energy retailers
The cost of 31 firms going bust – moving over customers, covering credit balances and paying to buy their energy at inflated prices – is shared across all households under a levy arranged by Ofgem. It has run into billions of pounds. The bust firms had failed to hedge against higher wholesale prices.
Source: Read Full Article
