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Energy prices: what’s going on?

All the debates about energy getting confusing? Here’s a bitesize breakdown to help you out…

It seems every day there’s a new story about our gas and electricity bills. From the recent Energy Summit to the longstanding battle about the cost of heating our homes, energy costs are hitting headlines on an almost daily basis. But what’s really going on and, more importantly, how will it affect our energy prices?

Green Deal

Almost a year in the making, you should be well acquainted with the Green Deal by now. It’s hitting the news now, because the Energy Act has just become law, which means it will be launched in year’s time. The Green Deal is one to watch, because  it means energy suppliers will give you a low-cost loan to pay for energy-saving measures.

Energy suppliers will be able to loan you money to help you pay for energy-efficiency solutions. So if finance was holding you back from getting your home insulated, then the opportunity awaits. The ‘magic rule’ of the Green Deal? Your repayments will always be less than how amount you save on your energy bills, so it won’t leave you out of pocket.

The Energy Summit

Prime minister David Cameron and energy secretary Chris Huhne called a meeting with energy suppliers and consumer regulators such as Ofgem and Consumer Focus to try and do something about rising energy prices.

The result? Not what we might have hoped for. Energy suppliers agreed to send letters to their customers reminding them that they should make sure they’re on the cheapest tariff and to advise their most vulnerable customers to consider having their home insulated. Ovo boss Stephen Fitzpatrick, called the outcomes a ‘really big wasted opportunity’, which left customers wondering if the industry will really change as promised.


The rate of inflation in the UK has been steadily rising and it now stands at 5.2%, due in large part to rising energy bills. It’s no surprise when you consider that the ‘Big Six’ major energy companies have introduced two price rises in less than 12 months and the household energy bills went up by £224 in that period. Rising inflation is increasingly behind politicians debating how they can force these costs down, or at least keep them stable.

Energy company profits

Recent figures from Ofgem suggest that energy suppliers are making £125 in profit per customer in the UK, up from £15 earlier this year (although this has been heavily disputed by some suppliers). Sound enormous? Ofgem thinks so, and has heavily criticised the energy companies.

As part of its  investigation, it wants to see more transparency around profits and wholesale gas prices and a reduction of the monopoly of six energy suppliers on the market. Will this help? Time will only tell, but with suppliers already disputing Ofgem’s figures, it looks like we have a long way to go.