We all know that our electricity bills are, and have been, going up for a while. We seem to be getting less and less for our money for exactly the same product, but why is this? Well, the general reasoning is due to the rising wholesale prices of electricity and upgrading the National Grid. Also, as the government demands more and more green energy, there is more investment needed in renewable generation. These factors and more are pushing up the price of the kWh without signs of stopping.
How much has electricity increased in the last year?
The summer of 2018 has seen significant electricity price hikes across the board. The larger electricity suppliers like SSE, EDF, British Gas, E.on, Scottish Power and Npower have increased their prices by 5.5% on average. These are quite significant increases when it comes to electricity costs for residential consumers.
UK electricity generation remains very much fossil and nuclear power plant reliant. Although recent inroads into renewable sources like green gas and hydropower hold much promise in helping the UK become energy independent, especially with Brexit looming this spring.
Smaller energy companies have been quick to bolster a renewable electricity supply that is both environmentally sound and affordable. The future is looking increasingly green with renewable energy set to take centre stage which can only be a good thing for people's wallets since it is close to beating traditional sources in terms of value for money.
Energy suppliers are still far off from reflecting the potential savings from moving to green energy in their energy prices so far.
Can people afford increasing electricity prices?
The majority of UK citizens are not seeing any increase in wages, meaning purchasing power per capita is dropping quite drastically. According to the ‘Office of National Statistics’ the number of adults working within 2% of the national minimum wage, around £13,824 (40 hours a week at 7.20p per hour), was 1,322,083 in 2015, which will have surely increased within the last year.
This means that the average electricity bill can represent anything between 2-8% of the earnings of this portion of the UK population. Even though energy efficiency has improved dramatically over the years with better energy ratings for appliances and boilers, this hasn't been sufficient to offset rising electricity rates and dampen household electricity consumption.
Since the regulated energy market was abolished in 1999, the promise of people being able to easily find the cheapest residential electricity has failed to materialise. Only time will tell if the fairly recent smart meter initiative to give customers accurate kilowatt hour metering will pay off in reducing energy bills.
Let's see just how much prices have risen over the years.
2006-2016 electricity prices
In order to compare the price of electricity across time, we need to use the Consumer Price Index (CPI). This measures the average prices in a chosen geography for everyday items such as petrol, groceries, electricity and clothing. Each figure represents a relative figure to the base unit which we would consider ‘average’. For this example we have chosen 2010 to be our base figure (100). We have also added a column to display the increase or decrease that occurs year on year.
This table uses a current British Gas electricity tariff as its base and the average usage of 3,100 kWh. Based on our research, we can see that we are currently paying an average of almost £300 more per year for our electricity than we were in 2006.
Here we can see that there has been quite a profound increase in price, resulting in a 62.6% increase between 2006-2016, the largest being a 15.5% increase between 2007-2008. Taking this information and basing the percentage increases on one of the current average tariffs on the market today, we can estimate the yearly average prices. This is illustrated through the graph below:
How much have gas prices changed? We keep a close eye on energy prices across the energy market. You can learn more about where gas prices stand here or speak with one of our energy experts on 01704 325069 to find the best energy tariffs in your area.