Well, it’s been a long time now since energy prices started increasing, in fact the Russian full scale invasion of the Ukraine started on the 22nd of February 2022, so it’s been over 14 months since prices everywhere started to rise and we in the UK have seen the largest increase in commercial and consumer energy costs and some of the highest in the western world.
What were energy prices prior to the war in the Ukraine and Covid-19?
In the UK we are subject to a price cap currently set by Ofgem but with intervention from the government this is to a whopping £2,500. When the price cap was first set in the UK in January 2019 to stop overcharging this was set to £1,137, which worked out at £94.75 on average per month. This quickly changed in February 2019 to £1,254 which was a monthly charge of £104.50.  Followed by a drop in august 2019 to £1,179 with a monthly average cost of £98.25.
This was followed by a drop again in February 2020 to £1,162 and a monthly average of £96.83. However prices started to change during the first lockdown of Covid-19 due a massive fall in wholesale demand as businesses closed all over the world to stop the spread of the virus and the price cap lowered to its lowest recorded price of £1,042 with a monthly average of £86.83.
Once lockdowns started to end in the UK, the prices started to rise but with little change in February 2021 to increase by £96 to £1,138 and a monthly average of £94.83. Prices continued to rise in 2021 due to wholesale price increases to £1,277 with a monthly average of £139 per month. The next price cap wasn’t announced until to April 2022 £1,971 with a monthly average cost of £164,25. This is when UK consumers were hit with nearly double the cost of energy since the price cap was first set. This was swiftly followed in August to a staggering £3,549, averaging a monthly cost of £295.75. Which is when the government intervened with a price cap of £2,500 and a monthly energy rebate of £67 which ran until March 2023 meaning average bills stayed at £141 per month.
The UK Government withdrew the energy rebate scheme when the price cap was lowered to £3,280 in April 2023, however this meant an increase in bills to every UK consumer as the cap was set to £2,500 by government intervention. Despite wholesale prices being at pre Ukraine war levels we continue to see high prices while existing agreements are wound up and this can then filter back to consumers.
What is the energy price cap likely to be towards the end of 2023?
According to Cornwall insights who provide expert analysis on the energy price cap, energy prices should start to fall in the second half of 2023 when the price cap is next expected to change, in July 2023 their analysis shows the price cap will lower to £2,076 or £176 per month. This is roughly a 15% decrease than you are currently paying, however this is expected to rise marginally in the latter part of 2023. This however is still nearly double your bill pre the Ukraine war.
Will energy prices go down in 2024?
Prices should start to catch up with wholesale decreases as we enter 2024, however how much will depend on other economic factors and how cold the winter is in 2023. Inevitably it is highly unlikely that this will be back to pre war and pre Covid levels due to inflation, however the price of these bills will certainly not be as bleak and damaging to consumers as they have been.
Is there anyway to get a cheaper deal at the moment?
Some providers are starting to see prices drop and have started to offer lower tariffs such as Ovo energy who have an existing customer tariff which would be 9% lower than the energy price guarantee of £2,500 however as a 12-month tariff you would be locked at this rate, which could mean you miss out on the reduction of any costs when the price cap is set in July.
Will this keep being a burden on my budget?
As wages and benefits have increased with inflation in recent months including the National Living Wage and Universal Credits it should be less damaging to your budget, however you are unlikely to see your disposable income back this year but the future is not as bleak as first expected.
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I hope you found this post useful – Money Lad.
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