Why Is Electricity So Expensive In The UK?

Overall, the energy prices within the UK have increased. This is mainly due to the huge rise in the price cap for domestic customers. Thanks to this, there has been a prediction of another increase in the price cap in October 2022. Hence, the energy prices would probably go higher before things remotely get better.

According to the NGO, i.e., the National Energy Action, it is estimated that around 16% of the houses in the UK were in fuel poverty already, and the price cap made this percentage jump even higher, from 16% to 24%.

This makes almost a quarter of the households that are not able to heat their houses in the winters or cool their houses in the summers. Around 24% of the households being deprived of such basic necessities doesn’t sit right in a country that is developed.

Possible reasons for the increase in price cap

The reasons that might have caused a hike in the energy bills and overall electricity bills within the UK might be simple instead of something even more complicated.

Gas tends to be more expensive this year than last year, and the UK being a net importer means that delivery from suppliers like Norway, Qatar, and Russia is significantly more expensive.

This is due to the increase in the demand for such resources over the past few years. The gas market has expanded widely, and this had impacted the Europeans to move from the Russian suppliers when they invaded Ukraine.

All of these global events have led to the increase in the price of natural resources like gas which is a major element needed for heating and electricity as well. This is because electricity is generated by using natural gas as well.

What are the major contributors to the cost of energy?

Before trying to further analyze the increase in energy bills, make sure you know that the price of energy is actually made up of many different things and factors. One of the biggest parts of it is the wholesale cost of energy, i.e., electricity and gas.

Electricity and gas are bought by your suppliers through the markets from the companies that own power plants, or sometimes from the gas importers as well, as natural gas is used to generate electricity as well as provide gas for heating.

Besides this, there are further costs which are needed to run the local as well as the national electricity networks, gas networks, as well as the cost of technology being used, e.g., the smart meters.

Once you start analyzing the typical amount a household would spend on energy bills, you would understand that sometimes it can be half of their incomes, especially for the middle class or poorer households.

A typical household that pays the direct debit will see an increase in the bill from 1277 pounds to 1971 pounds. This increase is usually due to the price of gas, which has increased a lot due to the wholesale price of energy overall.

Moreover, the electricity generated from this gas would be even more expensive, so that costs could be met by the suppliers.

Another cost is the network, which tends to make around 371 pounds of the new cap. This means there is an increase of 39%.

The major increase in the network cost is mainly due to the smaller energy suppliers going out of business or getting bankrupt.

Once you factor in such costs, you can see why the overall bill has taken a major hike. The policy costs have been intended to be cut down, due to which they are said to be slightly lower now.

However, it is important to know that the policy measures do makeup at least 8% of the price cap. Hence it isn’t only impacted on the bills but other things too.

What can we do?

According to many arguments and debates, the UK should produce more gas within the borders instead of buying expensive gas from outside the borders.

As gas is used to generate electricity as well, the expensive gas obviously produced more expensive electricity.

However, this won’t solve all the problems of the high electricity bills. Gas is obviously a global commodity, and the prices in the UK are mainly determined based on global trades as well.

Hence, it doesn’t matter where the gas is being extracted from. It is assessed that the gas produced within the UK was exported to mainland Europe in October 2021, over four times, as it was said to be more profitable.

If you have any sort of doubts about your energy supplier or want to compare electricity costs and bills, then you can make use of the Utility Bidder as well.

How to reduce the electricity bills?

After reading about the increase in the prices and electricity bills, there is only one thing that would come to mind, and that is, how does one reduce the energy bills in this crisis?

Whenever there is a price hike, it is predicted that many households might not be able to afford heating facilities, as well as cooling facilities whenever needed. Obviously, in such a situation, there is no such thing as saving money.

The only thing which household members need to remember is that they need to stay vigilant and careful about any extra electricity or gas being used around the house.

Make sure you turn off the lights whenever you leave the room, and reduce the appliances, which take up a lot of energy.

Instead of participating in electricity-consuming activities every day, make it two or three times a week, and use the washing machine no more than two times a week. These are small steps to help you save on your next electricity bill.

Is there something the government can do about electricity bills being increased and the energy crisis?

As a matter of fact, there are many things the government can do to help the households which are having difficulty affording basic necessities.

First of all, it is important to provide any sort of emergency funding needed to help people pay off high bills.

The government needs to protect the people from the rising energy costs overall and help the household save some sort of money by cutting the VAT on the energy bills.

Conclusion

Conclusively, energy bills, i.e., the bills from consuming electricity and gas, have taken a major toll within the UK. This is mainly due to the rise in the wholesale price of gas.

Gas is used to generate electricity as well, as it is understood that expensive gas would lead to an increase in the electricity costs as well.

There are many factors that need to be considered while consuming energy due to the peak in inflation and increased price caps as well.