Ofgem announced that the energy price cap will increase again in January 2023. The energy crisis has already caused many households lots of stress. Now is the time to be aware of further increases so you can be prepared.
The government introduced its energy support scheme, providing all households with a £400 discount from October 2022 to March 2023. It is unclear whether this support will continue for the rest of 2023. However, the government’s Energy Price Guarantee will rise from £2,500 to £3,000 from April 2023.
Without the discount or government support, the new cap means that Brits could spend up to 67p per kWh for electricity (plus a standard day rate of 46p) and 17p per kWh for gas (plus a standard day rate of 28p).
Using the most recent data from the ONS and the average price of energy per kWh for 2020 and 2021 we have estimated how much energy companies have charged each region in the UK for energy each year since the crisis started.
Let’s start with the capital. In 2021 households in London were charged £705 for energy, £289 for gas and £415 for electricity. In 2022 figures jumped dramatically. Households were charged £1,575.33 for energy, £1,063.11 for gas and over £512.21 for electricity. Even with the £400 discount from the government, that‘s still over £1,000 more expensive.
Due to Ofgem’s recent energy price cap increase, London households could spend over £3,445.48 on energy in 2023, £2,179.55 on gas and 1,189.28 on electricity. That’s a huge increase of £2,740.36from 2021 to 2023.
But London was not the most expensive city in the UK for energy.
Who spent the most?
On average households in Bradford use the most energy and therefore spend the most. In 2021 they spent over £1,200, in 2022 they spent over £2,500 (excluding government support) and in 2023, household energy costs are forecast to be over £5,300. That’s a cost increase of over £4,000 in just three years.
Bradford households also use the most gas. In 2021 on gas alone they spent over £500 and over £1,300 in 2022 (excluding government support). If usage remains the same they could be spending over £2,600 in 2023.
For electricity it was households in Reading that spent the most. Spending nearly £750 in 2021 and over £1,300 in 2022 (£900 with the government discount). By 2023 these costs could rise by almost £2,000, costing over £2,800.
Who spent the least per household?
On the other end of the scale, households in Derby spent the least on gas and electricity. In 2021, our calculations suggest that over £130 was spent on gas and over £200 on electricity. The year 2022 was more expensive, prices rose to over £340 and £360 respectively (excluding government support). But in 2023, this could jump to £766.97 for gas, and £891.55 for electricity.
What do the experts say?
Wholesale energy prices were already high at the beginning of 2022, but quickly shot up even further in February as Russian troops crossed Ukrainian borders.
High energy prices persisted for much of 2022, before starting to fall, with both oil and gas ending the year at the same level as before the War in Ukraine began.
Nevertheless, despite the downward pressure, energy prices remain high historically, and household bills will continue to remain elevated whilst this is the case. Fortunately, the UK government’s Energy Price Guarantee will limit the impact of high energy prices on British households in 2023.
Looking forward, as high inflation and rising interest rates slow economic growth around the world, it is possible that we will see more downward pressure on energy prices in the coming months. However, supply-side issues may mean it could still take a while for lower prices to filter through to consumers.
|Region||2021 Price||2022 Price||2023 Price|
|Region||2021 to 2022||2022 to 2023||2021 to 2023|
So, how did we get here? To settle on these stats, we used figures from ONS that revealed the amount of energy (gas and electricity) each region has used in the UK. This was shown as ktoe (kilo tonne of oil equivalent), which meant we had to multiply by 1163 (gWh) and then by 1,000,000 (kWh) to achieve these figures in kWh per hour.
To work out the 2021 amounts, we multiplied the amount of kWh by ICAEW’s average price of energy per kWh (3.4p for gas and 19p for electricity). For 2022, we did the same thing, but this time ICAEW’s price of energy per kWh was 8.7p for gas and 33.6p for electricity.
To calculate the average price of energy per kWh for each year we added the number of prices for each quarter and divided it by the number of prices.
For the 2023 predicted price, we divided the amount of kWh by Ofgem’s price of energy per kWh, which is 17p for gas and 67p for electricity.
We then multiplied the standard day rate (46p for electricity and 28p for gas) by 365 days and added this to the total.
To calculate the price of energy overall we added the total of gas and electricity together. In terms of increase, we worked out the difference between prices YoY and then the difference between 2021 and 2023.
We then applied the same methodology per household.
*All figures are before government support
Time to prepare
With or without government support our calculations still show the stark increase of energy costs.
With the knowledge that energy prices could increase, it’s crucial that UK households look at their current situations, and prepare financially for the rise.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.