Outraged, Cold, and Broke. WHY, as it’s getting colder, are UK energy prices going up by 10%?
Credit: Shutterstock, Alex Young.
Why UK Families Are Paying More While Energy Giants Cash In.
As Britain heads into another bone-chilling winter, millions of households are bracing themselves – not just for the cold – but for yet another gut punch from energy companies, a seemingly low blow in a time of need for so many around the country.
Ofgem’s latest bombshell? A 10% hike in energy prices is set to hit just as families crank up their heating. But why, when people need warmth the most, are we being asked to cough up even more cash? It’s like jacking up the cost of food during a famine.
Here’s the ugly truth.
Is Ofgem’s So-Called ‘Price Cap’ a Brazen Sham?
The energy regulator claims it’s “protecting” customers with a price cap. But let’s be honest – what good is a cap that’s going up just as temperatures plummet?
Ofgem’s decision to raise the average energy bill from £1,568 to £1,717 starting October 1 is nothing short of a slap in the face to ordinary Brits.
Their reasoning?
Global gas prices.
But that’s been the story for ages, hasn’t it? So why does the bill keep getting heftier while wages stay stagnant and profits for energy giants keep ballooning?
Are We Being Swindled by Suppliers?
Let’s not forget that Centrica, which owns British Gas, saw its operating profits for the first half of 2022 increase fivefold, reaching £1.34 billion compared to £262 million in the same period in 2021. This dramatic rise in profits was largely due to the soaring wholesale gas prices, which allowed the company to benefit from its North Sea oil and gas production as well as its energy trading activities.
Then, in 2023, Centrica reported record profits of £3.3 billion, largely driven by the soaring energy prices that followed the energy crisis caused by the war in Ukraine. British Gas alone saw a tenfold surge in its pre-tax profits, reaching £751 million in 2023, up from £72 million the previous year. This spike was linked to increases in the energy price cap set by Ofgem. Incidentally, back in 2022, the UK energy watchdog was accused by British Gas owner of ‘abdication of responsibility.’
However, in the first half of 2024, Centrica’s profits have halved, dropping to £1 billion compared to £2.1 billion in the same period in 2023. This decline is attributed to a “normalisation” in the energy market, with prices stabilising and fewer crisis-driven cost recoveries available. So what do you think companies like Centrica want now? You guessed it, another increase in the price cap to line their pockets.
Are Energy Giants Chasing Profits Instead of Customers?
Let’s not beat around the bush anymore. We’ve looked at the data, and we’ve analysed the situation: do the big energy firms care if you’re freezing in your home this winter? Ofgem’s Chief Executive Jonathan Brearly sounded unsure when he spoke to the media, stressing the message that energy companies should show empathy to those struggling to pay their bills. Reiterating that energy giants should offer payment options and not be trigger-happy when a customer can’t pay. But, the question begs, if the Chief Executive of the UK energy regulation body needs to make public statements like these, what does this say about the energy companies? What does it say about the level of power our regulating body has?
It might be reasonable to conclude that they care about their profits, and right now, their eyes are on greener pastures, literally. Keep reading for more on this later.
The Net Zero Pipe Dream is Leaving Us in the Cold
Ofgem and the government keep banging on about the shift to a renewable energy system and hitting net zero by 2030. But here’s the kicker: they’ve barely started. Wind farms and solar panels might be the future, but they’re not keeping anyone warm this winter. And let’s not even talk about the infrastructure nightmare. It’s going to take years before we can rely on renewable energy. Meanwhile, the big four Western European powers are arguably light-years ahead, and we’re still stuck with an energy system that relies almost entirely on gas, with no end in sight. Gas that’s getting more expensive by the day.
Where’s the Real Help? Heating or Eating: Take Your Pick.
Let’s be clear: slapping higher bills on families already struggling with the cost of living crisis is not “help.” While the government pats itself on the back for aiming for a greener, self-sustained energy system, they’re leaving ordinary people to freeze in the meantime. And where’s the outrage? Where’s the support for the millions who will have to choose between heating and eating this winter?
So What Now?
The truth is, this 10% price hike is a symptom of a much bigger disease. The UK’s energy system is broken, and it’s ordinary people who are paying the price.
As we head into winter, one thing is clear: the energy giants, regulators, and politicians will stay warm. How much more before something snaps?
Less than 1% of Europe’s stored gas is held by the UK.
Since the pandemic, demand for energy has shot up like never before. But with the UK pulling less from the North Sea, we’re now leaning even more on foreign suppliers. And let’s face it, with our crumbling infrastructure in desperate need of billions for repairs and upgrades, energy companies are passing the costs straight to consumers like us.
As if that wasn’t enough, the government’s big push for net zero isn’t exactly cheap. Levies, green energy targets, and new taxes aimed at cutting emissions are all piling onto our bills. Yes, we all want to save the planet, but does it have to come at the expense of the average Brit?
And let’s not forget the disastrous collapse of DOZENS upon DOZENS of smaller energy firms in the last few years. Sure, the bigger companies stepped in to rescue stranded customers, but customer acquisition costs money, and now we’re all paying the price for that ‘rescue mission.’ Customer acquisition also brings in profits. Essentially, the big energy companies now have more paying customers, and they’re passing part of the cost of acquiring those new customers onto the public, all while keeping the profit. It’s smart business.
With inflation biting and no sign of energy prices cooling down, it’s us, the everyday people, left to cover the rising costs. So, we have to ask, just how much more are we supposed to endure?
FUN FACT: Just showing up at the House of Lords is £361 a day for non-salaried attendees, while the winter fuel payment was only £300 a year for ordinary citizens. Now, it looks like there will be no winter fuel payments for some of the UK’s most vulnerable pensioners.
Energy Price Hike Hits Hard as UK Ranks Last Out of the Big Five European Powerhouses.
£115bn at Risk as Firms Flee to Greener Pastures
Ofgem announced in August that it would be increasing the energy price cap by 10%, raising the average home energy bill from £1,568 to £1,717 from October 1.
According to the Chief Executive of Ofgem Jonathan Brearly, while we remain dependent on gas, we will be in “a situation where prices go up again”. During a candid Sky interview, he urged the government and the industry to move towards a more sustainable energy system that isn’t dependant on gas, “one where we grow our own energy, domestically through renewable energy.”
According to experts, a renewable energy system will lead Britain to a more stable pricing situation, but it will take years. Ofgem has expressed its strong support for the government’s target to get to Net Zero by 2030, as it would be a mammoth improvement on the current situation and provide a stepping stone to a renewable energy system that would allow Britain to be self-sustained.
However, as stressed by Mr. Brearly, getting to this point will require a huge amount of infrastructure around the country, infrastructure that we do not currently have. It is only very recently that a project was approved to channel all the offshore wind in Scotland down to England, where the energy demand is highest. And these types of projects take years to build.
Britain currently ranks last out of the big FIVE Western European powers, lagging years behind the big powerhouses France, Spain, Germany, and Italy in terms of sustainable energy infrastructure and technology. In fact, shocking figures reveal that almost two-thirds of UK energy giants are packing up and moving their cash elsewhere, ditching Britain for countries with friendlier green policies. In a devastating blow, this could see a staggering £115 billion in investments slipping through the UK’s fingers as companies chase better opportunities abroad to hit their sustainability targets. The ripple effect could be devastating for an already feeble system.
Is It Time for Britain to Cosy Up to Russia?
It’s important to acknowledge that the surge in wholesale prices isn’t completely controlled by large energy companies. Global factors like COVID and the war in Ukraine are driving up costs for gas imports. Additionally, the collapse of smaller energy firms put pressure on larger providers to absorb millions of stranded customers, leading to significant operational costs. While the shift to renewable energy holds long-term promise, the slow pace of transition means consumers are stuck paying the price for a system still reliant on volatile fossil fuel markets. Make no mistake, we are far behind.
However, as temperatures plunge and energy bills skyrocket, the question on everyone’s mind is simple: Why are we paying more while the energy giants continue to post record profits? Just as winter tightens its icy grip around our necks, families across the UK are chocking for heat, choosing between warmth and other essentials. Big energy companies reliant on gas have seen their profits surge over recent years, reaping the benefits of higher wholesale prices, swallowing up customers from smaller competitors, and passing the bill on to ordinary citizens. And yet, these same companies are now hiking prices by another 10%, and the government is no winter fuel payments for many of the UK’s most vulnerable pensioners, leaving ordinary people in the cold – both literally and figuratively.
