Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Energy tariffs have emerged as one of the main election issues following the announcement of a reduction in Obgem’s energy price cap.
The average household energy bill will fall by 7 per cent (£122) from July, from £1,690 to £1,568.
While the Conservatives claim credit for the recent fall in energy prices, Labour counters that bills will still be £400 higher than they were before Russia’s invasion of Ukraine in February 2022.
here, I Review the facts behind the claims of both parties.
Claim: Even under new price caps, energy bills will be £400 more expensive than in 2021
Labour pointed out that energy bills will remain £400 higher than they were before Russia’s invasion of Ukraine.
Party leader Sir Keir Starmer said today: “Families are paying the price of 14 years of Conservative energy failure and are set to continue losing a staggering £400 a year under the new price cap.”
Because the energy price cap varies throughout the year, there is leeway for both Labour and the Conservatives to arbitrarily pick comparison dates when things are better or worse.
Russia’s invasion of Ukraine took place in February 2022.
Energy bills have been capped at £1,277 from October 2021 to April 2022.
Comparing the new energy price cap to this level means families would lose out by just £291 rather than £400.
However, the energy price cap was £1,138 from April to September 2021.
Compared to this time in 2021, families would lose out by £430 under the new price cap, lending some truth to Sir Keir’s claim.
Fact check: Partly true
Claim: The Conservatives are to blame for the recent fall in energy prices
Energy Minister Claire Coutinho said: “Thanks to our bold action, energy bills are at their lowest level for two years. We are now telling suppliers to put consumers first and bring real competition back to the market, reducing bills further and improving customer service.”
This is a bit complicated to ascertain, as there are many different factors that affect energy prices.
Energy regulator Obgem said energy prices were falling due to lower wholesale prices.
Scottish Power said the main driver for lowering the price cap was falling wholesale prices, particularly for oil and gas. Experts generally agree that the wholesale price of gas has the biggest impact on the price cap, as it is the main source of energy for UK households.
Russia’s invasion of Ukraine has constrained gas supplies and policymakers have feared shortages, at the same time as demand has surged as many companies ramped up production as pandemic restrictions were lifted.
Recent mild winters in Europe have led to lower-than-expected gas demand and excess stocks in reserves.
Experts generally believe this is the biggest factor behind the decline in wholesale gas prices.
Mild weather and good supplies in Asia have lowered gas prices in the region, while global supply conditions are also improving, according to energy consultancy Cornwall Insight.
Coutinho’s claim is open to doubt as the weather cannot be controlled by government policy.
In a March 2024 report, the Department of Energy Security and Net Zero said UK energy consumption last year was 1.6% lower than in 2022, “probably” reflecting the impact of rising energy and other prices.
Domestic consumption fell to its lowest level ever, and industrial consumption also fell.
In other words, high prices caused people to cut back on their energy use, resulting in a drop in demand.
Critics also argue that Britain’s long-standing reliance on imported gas contributed to prices soaring after Russia’s invasion of Ukraine.
The UK imported more energy than usual last year because domestic gas production fell to its lowest level on record, according to the Department for Energy Security and Net Zero.
Production from wind, solar and hydropower increased by 2 percent, but the ministry said these renewable technologies accounted for a smaller share of primary energy than fossil fuels.
One of the key policy changes for which the Conservatives can be held responsible is that the UK, like the rest of Europe, has become even more dependent on the US for natural gas. The UK’s two largest suppliers of natural gas imports are the US and Norway.
The UK is well supplied with US liquefied natural gas (LNG) cargoes via the Atlantic market, according to Cornwall Insight.
U.S. imports have been largely spared from the knock-on effects on trade from Houthi attacks in the Red Sea and the conflict between Israel and Hamas, and have also been relatively insulated from the effects of Russia’s invasion of Ukraine.
However, Cornwall Insight also warned that energy bills are expected to rise again ahead of winter, with wholesale prices hitting a 30-month low in February and rising again in recent weeks.
Fact check: there are more lies than truths