A Westminster Hall debate has been scheduled for 28 February on digital exclusion. The debate will be opened by Justin Madders MP.
Documents to download
Gas and electricity prices during the 'energy crisis' and beyond (449 KB , PDF)
The ‘energy crisis’
Global prices for gas, electricity, oil and other fuels started to increase from summer 2021 when economies began opening up after pandemic related-lockdowns. This underlying increase was magnified by reduced supply of fuels from some producers and increased tensions between Russia and Ukraine. Prices increased further in late 2021/early 2022 and spiked after Russia launched a full-scale invasion of Ukraine on 24 February 2022. Energy prices in Europe remained very high for much of 2022 with continued concerns around disruption to supply, particularly from Russia.
Wholesale prices for gas and electricity reached new record highs in the UK, Europe and elsewhere during this ‘energy crisis’ and have not returned to their earlier levels. This led to an unprecedented response from governments across Europe. In the short term this was mainly to support consumers facing much higher prices and, for some, to move away from Russian fossil fuels. Medium to longer term policies in the EU and UK aim to reduce dependence on imported fossil fuels more generally.
What are current energy prices?
Under the January to March 2024 direct debit price cap the average annual bill for typical gas and electricity consumption is £1,928. This is below the £2,380 level under the Energy Price Guarantee from October 2022 to June 2023, but 59% higher than in Winter 2021/22.
The price cap will fall by 12% to £1,690 in the second quarter of 2024 and is expected to further in the second half of 2024.
Under the current direct debit cap the average price of gas is 7.4 pence per kilowatt hour (p/kWh), the average price of electricity 28.6 p/kWh. Average standing charges are 29.6 p/day for gas and 53.3 p/day for electricity.
The average price of gas under the direct debit cap will fall to 6.0 p/kWh, the average price of electricity will fall to 24.5 p/kWh. Average standing charges under this cap will increase to are 31.4 p/day for gas and 60.1 p/day for electricity.
What was the Energy Price Guarantee?
Following concerns over the effect of a proposed 80% increase in the energy price cap, then Prime Minister Liz Truss announced that the Energy Price Guarantee (EPG) would be introduced from 1 October 2022 and last two years. This was the Government’s main measure to reduce the impact of the ‘energy crisis’ on consumers.
The EPG’s aim was to reduce the extent of price increases for domestic customers. Under the scheme, the Government set maximum prices for gas and electricity which were below those under the existing price cap. The Government compensated energy suppliers for selling at below cap prices.
Maximum energy prices for customers on standard variable tariffs are set by the lower of the EPG or the energy price cap. The EPG was lower during the period October 2022 to June 2023, so set maximum prices during this time.
The falls in the price cap since in July mean the EPG has not been needed and will not be needed again until it ends in March 2024.
How much docustomers pay?
The EPG and price cap are normally expressed as an annual figure. This is the annual bill that dual fuel (gas and electricity) direct debit customers with typical consumption levels would face if these prices remained constant across a year. The EPG level was originally set at £2,500 for two years from October 2022 to September 2024. This was based on the higher assumed ‘typical’ consumption levels from the time and is equivalent to £2,380 for the new lower consumption figures which are now assumed. It was later changed to £2,500 for the first nine months (October 2022 to June 2023) followed by an increase to £3,000 for the following nine months (July 2023 to March 2024).
The price increases under the EPG were softened for the first six months by the £400 Energy Bill Support Scheme. This was paid in six separate monthly instalments from October 2022 to March 2023. The Government announced on the morning of the Spring Budget 2023 (15 March 2023) that the planned 20% increase in the EPG would be delayed from April to July 2023.
Without the EPG, customers would have paid more under the price cap between October 2022 and June 2023.
The price cap for July to September 2023 was £1,976. As it was lower than the EPG, customers on standard variable tariffs with typical consumption saw bills fall to this level. The cap fell further to £1,834 In October 2023 before increasing to £1,928 in the first quarter of 2024. As these were below the EPG it will not be used to set maximum prices again before it ends in March 2024. The quarter 2 2024 cap will be lower still at £1,690.
Annual bills are not capped. Households which use more energy will pay more, those which use less will pay less. Prices vary by region and are currently higher for customers paying by quarterly bills.
Energy prices in Northern Ireland are not controlled by the price cap. The Government provided support for customers in Northern Ireland which was said to be equivalent to the EPG. This meant the largest electricity supplier in Northern Ireland cutting prices in November 2022 to below those in the rest of the UK. However, reduction in this support from April 2023, and its ending from July 2023, have led to price rises in Northern Ireland.
2023 price falls and prospects for further cuts
Wholesale energy prices fell in late 2022 but there was a substantial lag before these fed through to consumers. The reduction in the price cap in April 2023 was not large enough to take it below the EPG level, so customers did not see their bills fall until the cap fell below the EPG in July 2023.
Unit prices under the July-September 2023 cap were 27% lower than under the EPG for gas and 9% lower for electricity. Standing charges remained the same. The October to December 2023 cap saw unit prices for gas falling by 8% for gas and 9% for electricity. Standing charges increased by 1%. Unit prices increased by 8% and 5% for gas and electricity respectively under the January to March 2024 cap with no change in standing charges.
The April to June 2024 cap will see unit prices for gas falling by 19% and electricity by 14%. Standing charges will increase by 10%. Despite these lower prices falls typical bills under the April to June 2024 price cap will still be almost 40% higher than in winter 2021/22.
Wholesale prices increased in late summer and autumn 2023 and this was reflected in the increase in the cap at the start of 2024. Lower wholesale prices from December 2023 have led to the fall in the Q2 2024 cap and mean the cap is currently forecast to fall by around £230 or 13% in the third quarter of 2024. Forecasts of the price cap are uncertain so there is no guarantee that prices will fall later in 2024.
Lower wholesale prices have led suppliers to start offering fixed tariffs again from summer 2023. However, it’s likely that they will be cautious in their pricing and any return of competition to the market is expected to be slow.
With little immediate prospect of savings from fixed tariffs or substantial cuts in the price cap, the only way to substantially reduce energy bills, while still adequately heating and powering homes, is to improve the energy efficiency of properties.
Source: Ofgem, Gas prices: Forward delivery contracts – weekly average (GB)
Revised Typical Domestic Consumption Values
Ofgem has introduced new lower Typical Domestic Consumption Values (TDCVs) for all its relevant publications from October 2023. This takes the assumed typical level of gas consumption down from 12,000 kWh per households per year to 11,500 kWh and typical electricity consumption from 2,900 kWh to 2,700kWh.
This change makes an average bill for typical consumption look lower, even if prices per unit of energy are unchanged. However, it does not have affect trends in prices or bills.
Most statistics included in this briefing use the new lower TDCVs. Where relevant, ie. for discussion of EPG levels, data on average bills is presented using both the current and the old TDCVs. Unit prices are also included as these are not affected by assumptions about TDCVs.
The latest Government guidance on the EPG can be found on the Energy Price Guarantee page (last updated 1 January 2024).
The Library briefing Domestic Energy Prices includes more analysis of the causes of recent prices rises, historical data and information on prices of other domestic fuels.
The Library briefing Households off the gas-grid and prices for alternative fuels looks at prices of fuels for households that do not use mains gas for heating and compares changes in their prices to those for mains gas.
The briefing Energy efficiency of UK homes presents data on energy efficiency levels across the nations of the UK, variations by different types of properties and households, insulation measures and government funded/mandated energy efficiency schemes.
The briefing Introduction to the domestic energy market explains key concepts in the domestic energy market and looks at how the market is structured, how bills are calculated and the challenges facing energy supply.
The briefing Constituency casework: Government support for energy bills includes answers to frequently asked questions about Government help with energy bills.
The data dashboard Local area data: fuel poverty gives fuel poverty statistics for constituencies in England and local authorities in Scotland, Wales and Northern Ireland. Constituency data: Households off the gas grid shows patterns of connection to the gas grid for constituencies in Great Britain. Constituency data: Energy efficiency includes data on energy efficiency measures and ratings.
Documents to download
Gas and electricity prices during the 'energy crisis' and beyond (449 KB , PDF)
Record energy price rises have led to concern that more families will be drawn into ever deeper fuel poverty. This briefing at how fuel poverty varies across the UK, policies to address fuel poverty, and stakeholder comment on the issue.
This briefing covers rising prices including food and energy inflation, Government support, and how the cost of living affects households.