Yes, there is a Europe-wide energy crisis – but must Britain bear the brunt?

As Ofgem raises the energy price cap for a third consecutive quarter – and for more than expected – James Moore asks is there is anything that hard-pressed consumers can do to bring down their fuel costs

Mere months after the last energy price hike, Ofgem has revealed that April’s price cap will increase household bills by £111 – that’s 6 per cent higher than expected and 9 per cent higher than this time last year, bringing the average to £1,849 per year.

“Rising global wholesale prices for energy are the main reason for the increase” is what Ofgem cited as the motive behind the move. But this just feels like an excuse when we look at the very real fact that Britain already has some of the highest prices in Europe, and many families and elderly people are struggling to keep up.

To put it into perspective, of the 33 European capital cities included in the Household Energy Price Index (HEPI) published in December 2024, London was the fourth most expensive at 36.5 cents (€) per kilowatt hour (kWh), beaten only by Germany (40.23¢), Denmark (37.31¢) and Belgium (36.91¢).

Now, of course this figure is based on several variables: the source of the energy (coal, nuclear, gas, renewables, oil), the way it is taxed, and any subsidies that may exist. However, if you strip out energy network charges and taxes, Germany would rank 10th, lower than Britain, Italy and the Netherlands.

To his credit, Ofgem CEO Jonathan Brearley acknowledged the increase “puts families under huge stress and increases costs for all customers”. But he also outlined that energy debts “began during the energy crisis have reached record levels and without intervention will continue to grow”.

He’s right, of course. But, Mr Brearley, would you like to tell us when that investment is going to be delivered?

Polling by YouGov for National Energy Action, the fuel poverty charity, found nearly half (49 per cent) of adults are likely to ration energy in coming months. That is what you call a crisis.

The charity is calling for “additional targeted energy bill support through a social tariff or an expanded Warm Home Discount; a help-to-repay scheme to support households out of debt; and for the government’s Warm Homes Plan to provide significant investment to insulate the coldest homes for the poorest households”.

I’d like to be wrong about this, but I’m not sure we’re going to see any of these steps.

What Ofgem has promised is to address the issue of standing charges. They are a fixed fee we all pay as part of our bills, for connection to the network and to cover the price of discounted tariffs, the green transition and suchlike. Ofgem says they are going down in parts of the country, but that is not true for everywhere.

The problem with them is they limit one’s ability to cut costs by using less energy. Fixed fees are particularly tough on low users. Pensioners would be an example, especially those living alone as many do.

Ofgem plans to force all energy providers to offer zero standing charge tariffs but the new rules won’t come in until the winter. And these tariffs can also prove to be very expensive unless you’re a very low user.

Says USwitch, the price comparison site: “In most cases it makes sense to go for an energy plan with paid standing charges as there is a greater amount of choice and they’re usually cheaper than plans that don’t have standing charges.”

To work out whether they’ll benefit, people are going to have to turn into energy analysts when they’ve other things to worry about, such as feeding the kids, paying the mortgage, and the many other financial burdens of modern life.

Ofgem’s plans are thus no panacea. They’re a sticking plaster and one that will only partially ease the financial bleeding for a limited number of people. At this point, consumers might very well be asking quite why the benefits from renewable power generation, which are formidable once the costs of putting up the turbines have been met, aren’t being passed on to consumers.

There is a technical explanation: the price of electricity is determined by the most expensive source of energy to meet the necessary demand. In the UK, that is gas, which makes up a higher proportion of the mix when compared to say France, where nuclear is king.

Needless to say, that isn’t going to provide much comfort to those facing sky-high bills who may look askance at the wind turbines sprouting up and wonder why they’re not helping.

As I wrote yesterday, Britain’s green economy is booming and that is a welcome development. It helps power economic growth, provides a lot of well-paying jobs and reduces the nation’s carbon footprint. Trouble is, the project is going to fall flat on its face if people lose faith in it. They’re going to do that if they can’t see tangible benefits.

Soaring energy prices are also the last thing the economy needs. They’ll hit businesses, already grappling with Rachel Reeves’ tax rises, while rock-bottom consumer confidence will remain nailed to the floor.

Politics is about solving problems. This is one that energy secretary Ed Miliband needs to put his mind to, and fast. Neither his pious speeches, the regulator’s virtuous statements, nor woolly-sounding technical explanations are going to wash with an increasingly restive public fed up with paying what are shaping up to be Europe’s highest energy prices.

Secretary of state, do your job. Fix this.