Energy prices hit new records as charities warn of ‘heat rationing’


UK business & economy updates

Many more households will be forced into “desperate” measures such as rationing their heating this winter, charities have warned, as a global gas supply crunch, low wind output and strong demand continued to push energy prices across Europe higher.

In the UK, day-ahead power prices hit £540 per megawatt hour on Monday, the highest level since 2008, according to the consultancy Cornwall Insight. The equivalent gas price reached a new all-time high of £1.51 per therm.

UK and continental European energy prices have been hitting a series of fresh peaks in recent months driven by a combination of a global gas shortage, a bounceback in energy demand after coronavirus lockdown restrictions were eased and some of the poorest conditions for wind generation in the North Sea for more than two decades.

Gas stocks in Europe, already low after the prolonged cold weather last winter, have taken longer to replenish after a curb on supplies from Russia. Increased demand from Asia for liquefied natural gas (LNG) has also pushed prices even higher.

An adviser to the US State Department warned over the weekend that Russia’s decision to limit supply and the low gas stock had put lives at risk in Europe this winter.

In the UK, gas production has been 28 per cent lower so far this year as companies have carried out maintenance that was delayed from during the height of the pandemic.

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Phil Hewitt, director at energy consultancy EnAppSys, said high prices for electricity on subsea cables, through which Britain trades power with continental Europe, were also a factor on Monday. Gas is still the single biggest source of electricity generation in Britain and is the fuel that heats the majority of UK homes.

“We suspect that this is not the end of the high prices for this week,” said Hewitt.

Julien Hoarau, the head of EnergyScan, the analytics unit of French utility Engie said wind power generation in the UK during the first two weeks of September was down almost 60 per cent year-on-year.

“Strong competition for gas supply combined with low renewable generation — for power markets like the UK, it’s a bullish cocktail,” he said.

The surge in prices in recent months has triggered fears of a bleak winter that could force households under financial strain and energy intensive industries to ration consumption.

British energy regulator Ofgem announced in August that prices for 15m households, whose bills are dictated by two energy price caps, would rise by at least 12 per cent from October. Analysts said the continued increase in wholesale prices would lead to a further substantial rise for the energy price caps when they come up for review early next year. Any increase would come into force next April

Joe Camish, analyst at Cornwall Insight, said it was “conceivable that the level of the price cap could rise by 10 per cent or more if wholesale prices keep climbing.”

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Charities have warned the rise in October coincides with the end of a temporary uplift in the UK’s main welfare benefit.

Ruth London of the campaign group Fuel Poverty Action said higher bills would be “devastating” for millions of households especially “when you get people who are already counting pennies and who are already rationing their heating”.

In the UK, 4m households were unable to afford to adequately heat their homes even before the latest energy price crisis. Some 10,000 deaths a year are linked to living in a cold home, according to the charity National Energy Action.

The NEA said households under financial stress tend to resort to “desperate” measures such as restricting their energy usage to just a few hours a day, or taking refuge in warm public spaces such as libraries or cafés.

Dame Clare Moriarty, chief executive of Citizens Advice, said the “perfect storm” of rising energy bills, the planned cut to universal credit next month and a potential rise in redundancies following the end of the UK government’s furlough scheme would “push millions into the red”.



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