Gas crisis will continue to cost households despite drop in energy price cap

The UK’s energy price cap has been reduced, but the savings for households will be small and temporary.

This is according to new analysis from the Energy and Climate Intelligence Unit (ECIU), which shows that while the energy price cap will see a £17 reduction this summer, UK households are still facing major increases in energy costs over the next few years.

The UK’s ongoing gas crisis is set to continue, with the price cap expected to rise by over £150 to £1,724 this October – 50% higher than pre-crisis averages. This high pricing is forecast to last until at least October 2025, meaning households could pay an additional £600 over the 12 months from October 2024.

In total, the average household has already paid almost £2,000 more for energy over the first three years of the gas crisis. By September 2025, the total extra cost per household could reach nearly £2,600. Combined with £1,400 in government support per home, the total extra costs could approach £4,000 per household.

Dr Simon Cran-McGreehin, head of analysis at ECIU, says:

“The UK’s high dependence on gas for electricity generation and heating has cost bill payers £2,000 so far during the gas crisis and the economy as a whole tens of billions of pounds. Common sense measures like investing in insulating the poorest homes, switching to electric heat pumps and fast-tracking British renewables will leave us less vulnerable to the whims of the international gas markets.

“North Sea gas output is declining so unless we make the switch we’ll be ever more dependent on foreign imports. The maths is clear, when it comes to energy independence, new drilling licences are a side show making a marginal difference compared to the immense quantity of homegrown energy that offshore wind and other renewables can generate.”

Households whose homes have worse than average energy efficiency are being hit even harder. Homes rated EPC E for gas and power will be costing around £2,060 over twelve months when prices rise again in October, which is £300 more than a typical home, and homes rated EPC F will be costing £2,250, which is almost £500 more than a typical home.

Upgrading an EPC E home with insulation and other energy efficiency measures to reach the government’s target of EPC C would reduce its bills by £440 a year under prices expected this coming winter. For an EPC F home, the saving would be £640.

Some households have been spending less than on energy during the gas crisis because the high prices mean that they can afford to buy less energy than they need, with potential implications for their health. Government data shows that, even accounting for longer-term trends in falling demand due to energy efficiency measures, households used 15% less gas and 10% less electricity in 2022 than before the gas crisis. Data is currently available for only the first nine months of 2023, but that shows cuts of 13% and 18% in total household gas and electricity demand, respectively, compared to averages for the same periods in the three years immediately prior to the gas crisis.