Many will be aware that the Big Six energy suppliers have recently announced electricity price increases, one energy supplier with a huge increase of 15% on last year’s prices. Some energy suppliers have already increased their prices with the rest of the energy suppliers increasing their prices in April 2017. The Big Six electricity price increases can be seen below:
Npower – 15%
SSE – 14.9%
E.ON – 13.8%
Scottish Power – 10.8%
EDF – 8.4%
British Gas – freezing prices until August
British Gas are the only energy supplier who are not increasing their prices at present but many expect their electricity price to increase after August.
Will Morris, SSE's managing director for retail, said he "deeply regretted" having to put prices up also stating “we have seen significant increases in electricity costs, which are outside our control, without an increase we would have been supplying electricity to domestic customers at a loss." Tony Cocker, chief executive of E.ON UK, said: “This is the first time since January 2014 that we have increased... it is an announcement we never want to make but is due in large part to the fact that many of the costs we don’t directly control.” This is something the energy suppliers are repeating - that the increase in energy prices is not driven by greed but due to costs that they cannot control. This is a cause for concern.
One factor energy suppliers cannot control is the demand for energy. The demand not only drives the whole energy system but is possibly one of the largest factors affecting its price. Energy demand comes from more than just domestic consumers; it comes from across all industries and virtually every aspect of life; consumers, energy generation, fuel and transportation, manufacturing, computers and telecommunication, etc An energy demand forecast can give us a good indication of cost, as prices tend to rise with demand. It has been predicted that there will be another 35% increase in energy requirement by 2040. Whilst this seems like a while away yet, it suggests that energy prices will increase considerably.
Other than demand, the Government’s failing policies especially in terms of energy production have been to blame for increases in energy prices. ‘Government meddling is responsible for a huge rise in UK energy prices that is crippling British households and businesses' a recent report from Parliament has concluded. It found 'badly-designed energy policies from successive administrations not only neglected costs to consumers, but failed to ensure the country has a secure future energy supply that will keep the lights on.’ Our current Prime Minister Theresa May has even been quoted saying "the market is not working as it should" and has threatened that the government will have to intervene to control energy prices. However this seems unlikely as one senior industry figure has suggested government intervention would drive some companies out of the market and make it even less competitive. This has also been confirmed by Diego Zuluaga, Financial Services Research Fellow at the IEA (Institue of Economic Affairs) who said: “The UK’s interventionist energy policies have caused prices to rise by over 50% for households and businesses over the last 15 years.”As we can see there doesn’t seem to be a quick and easy fix and that the price of electricity will increase until the generation of electricity becomes cheaper and more reliable.
With the Government threatening to intervene due to these recent price increases you’d think that the recent price increase is unprecedented. Unfortunately the recent price increases do not seem like a one off, many can only see electricity prices increasing in the future due to large costs arising from subsidies, the introduction of Smart Metering, Faster Switching, CMA recommendations and the Hinkley Point nuclear power station which seems to almost guarantee price increases due to UK consumers covering the difference between the strike price and the wholesale price.
To conclude, the recent electricity price increases are huge and that this is due to a variety of reasons such as demand and government policies. It also looks very likely that electricity prices will continue to increase even more in the future.
However consumers do not have to be completely helpless in this situation, there are a few things you can do to combat the rising electricity prices and take control of how much you pay for electricity - You can generate your own electricity and make your property as energy efficient as possible to make sure you are not a victim of the inevitable ever increasing electricity prices. Many are safeguarding against the electricity price increases by generating their own electricity with a solar PV system. With the Tesla Powerwall 2 now here to compliment a solar PV system, many can become self sufficient and not have to pay for electricity from their energy suppliers.