For most households, the cost of gas and electricity is now the third largest outgoing, after mortgages or rent, and food bills.
A recent round of price increases among the big six UK energy firms means that the typical annual energy bill is now around £1,400.
Hard-pressed families
This is more than double the rate seven years ago: in 2006, the average family spent between £600 and £700 a year on gas and electricity.
Last month the government’s Fuel Poverty Advisory Group (FPAG) warned that soaring energy prices were pushing more and more households into fuel poverty.
The group said that it expected 300,000 families to be in fuel poverty – defined as when at least 10 per cent of household income is spend on gas and electricity – at the end of 2012.
FPAG chairman Derek Lickorish says: "A toxic cocktail of rising wholesale prices, the high cost of energy reforms and cuts in incomes for many households, means fuel poverty levels are set to sky rocket without radical action."
How did we get here?
So why have energy bills increased so sharply in the last few years?
According to the Committee on Climate Change (CCC), the body set up in 2008 to advise the government, the main reason is an increase in the wholesale price of gas, which affects electricity prices as well.
The CCC found that almost two-thirds of the rises in gas and electricity prices over the past seven years were down to higher gas prices.
Political instability
These have been caused by a number of factors: rising global demand and instability in the Middle East has pushed up the price of oil, which feeds through into gas prices.
The fall in the value of sterling during the financial crisis also made imported gas more expensive.
About 16 per cent of bill increases have been down to the cost of investment in energy-supply networks, the CCC said.
The cost to suppliers of implementing low-carbon government policies and funding improvements in their customers’ energy efficiency has added less than 10 per cent to bills.
More rises to come?
Bills are likely to rise further over the coming years. But the CCCs says that investing in low-carbon technology such as wind power will limit these rises.
The committee believes that £100 a year will be added to each home’s bill by 2020 as a result of low-carbon policies. But it warns that if the UK were to maintain its reliance on gas, annual bills would increase by more than half in the next few decades.
CCC chairman Lord Deben said: "Our analysis confirms the benefits of adopting a strategy which invests in low-carbon technologies.
"This provides a portfolio of energy sources as insurance against the risk of high gas prices, and lessens the impact on household bills in the long term."
A recent round of price increases among the big six UK energy firms means that the typical annual energy bill is now around £1,400.
Hard-pressed families
This is more than double the rate seven years ago: in 2006, the average family spent between £600 and £700 a year on gas and electricity.
Last month the government’s Fuel Poverty Advisory Group (FPAG) warned that soaring energy prices were pushing more and more households into fuel poverty.
The group said that it expected 300,000 families to be in fuel poverty – defined as when at least 10 per cent of household income is spend on gas and electricity – at the end of 2012.
FPAG chairman Derek Lickorish says: "A toxic cocktail of rising wholesale prices, the high cost of energy reforms and cuts in incomes for many households, means fuel poverty levels are set to sky rocket without radical action."
How did we get here?
So why have energy bills increased so sharply in the last few years?
According to the Committee on Climate Change (CCC), the body set up in 2008 to advise the government, the main reason is an increase in the wholesale price of gas, which affects electricity prices as well.
The CCC found that almost two-thirds of the rises in gas and electricity prices over the past seven years were down to higher gas prices.
Political instability
These have been caused by a number of factors: rising global demand and instability in the Middle East has pushed up the price of oil, which feeds through into gas prices.
The fall in the value of sterling during the financial crisis also made imported gas more expensive.
About 16 per cent of bill increases have been down to the cost of investment in energy-supply networks, the CCC said.
The cost to suppliers of implementing low-carbon government policies and funding improvements in their customers’ energy efficiency has added less than 10 per cent to bills.
More rises to come?
Bills are likely to rise further over the coming years. But the CCCs says that investing in low-carbon technology such as wind power will limit these rises.
The committee believes that £100 a year will be added to each home’s bill by 2020 as a result of low-carbon policies. But it warns that if the UK were to maintain its reliance on gas, annual bills would increase by more than half in the next few decades.
CCC chairman Lord Deben said: "Our analysis confirms the benefits of adopting a strategy which invests in low-carbon technologies.
"This provides a portfolio of energy sources as insurance against the risk of high gas prices, and lessens the impact on household bills in the long term."
‘Greater reliance on imports’
Gareth Kloet at Confused.com says that there is little the government can do to prevent energy price rises in the short-term.
"Our infrastructure is old, massively expensive to replace and maintain, and with so many nuclear power stations coming to the end of their economical lives, prices have risen as has our reliance on imports," he says.
"The government can do little to prevent these rises apart from allowing some of the more controversial projects to go ahead, for example the Severn barrage, shale fracking, as well as investment and planning for wind farms."
Reduce consumption
For consumers, the only way to cut bills appears to be by finding the cheapest energy supplier, and by consuming less energy.
Kloet adds: "Our advice to customers is simple: shop around for the best deals. The gap between the most expensive tariff and the cheapest is still massive."
And don’t forget that better deals may be available from some of the smaller suppliers, such as Ovo, First Utility or Co-operative energy.
Kloet has the following energy-saving tips:
Gareth Kloet at Confused.com says that there is little the government can do to prevent energy price rises in the short-term.
"Our infrastructure is old, massively expensive to replace and maintain, and with so many nuclear power stations coming to the end of their economical lives, prices have risen as has our reliance on imports," he says.
"The government can do little to prevent these rises apart from allowing some of the more controversial projects to go ahead, for example the Severn barrage, shale fracking, as well as investment and planning for wind farms."
Reduce consumption
For consumers, the only way to cut bills appears to be by finding the cheapest energy supplier, and by consuming less energy.
Kloet adds: "Our advice to customers is simple: shop around for the best deals. The gap between the most expensive tariff and the cheapest is still massive."
And don’t forget that better deals may be available from some of the smaller suppliers, such as Ovo, First Utility or Co-operative energy.
Kloet has the following energy-saving tips:
- Turn down the heating in your home as far as you can.
- Switch off lights and appliances when not in use.
- Consider getting an energy monitor to help educate yourself as to how much your spending and on what.
- Only boil as much water as you need.
- Take simple insulation measures like cavity-wall insulation, loft insulation and draft exclusion, many of which you can obtain grants for from the government or your energy supplier.
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