Energy prices: Prices rocketed to new highs - but how much will it cost you?

ENERGY prices have surged to hit 11 times above normal levels, but how much will it cost you?

Energy bills for UK households to increase by £139

Energy prices could rise up to £1,277 a year for some British consumers as the ageing infrastructure of the UK’s power network and surging wholesale prices put the sector under increasing pressure. In recent years small suppliers have battled in a highly price-competitive market which has encouraged customers to switch providers. But now the cap has been raised and looks likely to rise again next year, meaning customers are in for potentially years of ever-increasing prices. Express.co.uk speaks to industry experts about why these prices have rocketed to record highs.

Energy prices have hit a record high as a gas supply crunch, low wind speeds and power station closures heap more pressure on this sector.

These prices will rise by hundreds of pounds within a matter of weeks after dozens of suppliers withdrew their cheapest deals from the market.

This is a result of surging wholesale prices in this industry.

The wholesale day-ahead power price in Britain rocketed to £2,500.01 per megawatt-hour (MWh) on Wednesday, with an average daily price of £424.61.

On Thursday the day-ahead power price in Britain hit £1,500.10 MWh, with the average daily price at £414.88.

The day-ahead power price dropped to hit £300 on Friday, with the average price at £160.26 compared to the day-ahead power price of £219.85 with an average price of £157.

This compares to an average of £106.83 throughout August and £35.26 throughout 2020.

READ MORE: Andrew Neil erupts at QT guest for 'embarrassing' GB News claims

Energy prices: Energy prices

Energy prices: Prices are rocketing, but how much will it cost UK consumers? (Image: GETTY)

Energy prices: Boris Johnson

Energy prices: Prices could rise up to £1,277 a year (Image: GETTY)

Energy expert Alex Troth, Commercial Director at Seaglass Cloud Technology said the prices have been due to “an almost perfect storm of events”.

He told Express.co.uk: “There has been a shortage of gas across Europe, and the UK has less gas storage capacity than in previous years; wind generation has been low; high interconnector capacity costs after Brexit and price decoupling from the larger European pool that could act as a price stabiliser; and some generators sitting out the wholesale market to get higher prices in the balancing mechanism.

“If you then add on a fire at the French interconnector today – that will be offline for a week and at half capacity for six months – we can expect a volatile winter, especially if it is cold.”

He added four suppliers have exited the market in the last week alone which means UK consumers are being forced back to larger suppliers.

Energy prices: Bill

Energy prices: Prices rose and are now at a record high (Image: GETTY)

Energy experts have warned heavy energy users, such as factories and steel mills, might have to swap to diesel generators to cut their exposure to surging power prices.

Households across Britain must also be prepared to see rising energy bills in the coming months.

The global energy supply crisis is now impacting countries across Europe, with Ireland’s single electricity market having blocked power exports to Britain via the undersea Moyle Interconnector cable for the second time in less than a week on Tuesday.

This move was made in a bid to preserve energy supplies in Ireland.

DON'T MISS
How your weekend plans could be derailed - UK Government warning [INSIGHT]
Putin sparks panic in Germany over natural gas blackmail fears [EXPLAINER]
Best overall supplement: Magnesium helps with bone regeneration [ANALYSIS]

Energy prices: kWH

Energy prices: Prices surged to hit £2,500.01 this week (Image: GETTY)

Suppliers in the energy sector pulled their cheapest fixed-rate offers on September 16 in the wake of two energy companies going bust earlier this week.

This left up to half a million customers being moved to new suppliers within days by the energy regulator Ofgem.

Price comparison platform Compare the Market switched off its energy comparison tool due to a lack of cheap deals this week.

A Compare the Market spokesman said: “We'll resume energy comparison as soon as we can be confident we can offer true comparison for customers.”

Competitor price comparison site GoCompare is currently offering just three small energy companies on its platform.

Energy prices: Bill

Energy prices: Househols could see bills rise by between £139 to £1,277 a year (Image: GETTY)

In a bid to keep up with demand, the UK was compelled to fire up two old coal power plans to help meet electricity demands.

Nexans’ COO and Senior Executive Vice President of the Building Territories Northern Business Group, Vincent Dessale claims the role of the ageing power infrastructure across the UK and Europe is also having a huge impact on recent energy price increases - in addition to the surge in wholesale costs.

Mr Dessale told Express.co.uk: “The recent energy price crisis is caused by a number of factors, not least the ageing infrastructure that props up power grids across Europe.

“Many of the cables that supply our electricity have been in place since the second world war.

“This urgently needs to be addressed by governments if we’re to safeguard consumers against ongoing price rises.

“We estimate the process of overhauling these creaking systems will require a total of £3.76tn (€4.4 trillion) investment by 2030.

“While it’s a big ask, it’s a vital one.”

Ofgem will be increasing its price cap for standard tariff and other default deals by £139 a year from October 1.

In real terms, this means the typical gas and electricity customer may see their bills increase by as little as £139 a year - right up to as much as £1,277 a year from next month.

The Ofgem price cap helps to limit the amount firms can charge customers on standard variable tariffs.

Wholesale gas prices have increased by 68 percent in the past five weeks, with costs estimated to have risen by an estimated 324 percent compared to this time last year.

But energy experts have warned this increase in the cap could rise against next year to reflect the rises in wholesale prices.

Households will likely see bills increase by an additional £280 next year if the cap is raised to reflect the 60 percent uplift in wholesale prices.

Mr Troth told Express.co.uk: “Ofgem’s price cap is stopping suppliers from increasing their prices above a certain level, which means they may have to sell power at a loss.

“Ultimately, this means that there will be fewer suppliers in the market and fewer new entrants, which will lead to less competition in the market and a potential return to the domination of larger suppliers.”

He added: “Due to expected supplier losses under this price cap, we would expect to see more suppliers fail.

"This would result in less competition and innovation across the market, which means that there will likely be fewer opportunities for future savings to be made.

“With the drive away from ‘dirty’ coal and the current high costs of gas, both of which provide a stable baseload of energy, investment in solutions to manage complex and less stable levels of energy price and production are required.

“Fewer players in the market to innovate and volatile conditions for investment are therefore a concern.”

Would you like to receive news notifications from Daily Express?