From 1 July, Britain\u2019s energy price cap rises again, by 13 per cent. A typical dual-fuel household paying by direct debit will see its annual bill climb from \u00a31,641 to \u00a31,862, an extra \u00a3221, or roughly \u00a318 a month. Yet when Ofgem published the figures on 27 May, it drew attention to something easily missed: in the same adjustment, electricity rose by about 5 per cent while gas jumped by about 24 per cent. The same storm, blowing on two fuels, struck one nearly 5 times harder than the other. That gap, not the headline 13 per cent, is the part worth reading closely.<\/p>\n\n\n\n
The shock did not start in Britain. Conflict in the Middle East has pushed up international wholesale gas prices, with wholesale costs rising around 28 per cent over the past 3 months. Wholesale cost is the largest single component of the cap, roughly 40 per cent of a typical bill, and the main thing that moves it each quarter. When the wholesale gas price moves, the bill moves with it. The question is why gas passes the increase through almost in full, while electricity behaves as though wrapped in a layer of padding.<\/p>\n\n\n\n
A gas bill has a simple, unforgiving structure. The price a household pays tracks the international wholesale price almost directly, with little in between to dilute the shock, so if the wholesale price rises by a quarter, the gas bill rises by a quarter, near enough to the penny. Electricity is built differently. On the British grid a gas-fired power station is often the plant that sets the wholesale electricity price, because under marginal pricing the last and most expensive plant called upon sets the price for the whole system, and that plant is frequently burning gas. By that logic, when gas rises, electricity ought to rise in step. But gas is no longer the whole of the grid. Wind, solar and nuclear do not become dearer because of a war in the Middle East, and their share of the generation mix keeps growing, placing a thick cushion between the wholesale electricity price and the global gas market. When gas spikes, that cushion absorbs part of the blow, and electricity rises by only 5 per cent. Ofgem put it plainly: the smaller rise in electricity reflects the larger amount of renewable generation on the system.<\/p>\n\n\n\n
Set the unit rates side by side and the gap is not only clear but moving. In the first quarter of this year, electricity cost about 27.7p per unit and gas about 5.9p, making electricity 4.7 times the price of gas. From April, electricity fell to about 24.7p and the multiple eased to about 4.3. From July, gas rises to about 7.3p and electricity to about 26.1p, narrowing it further to about 3.6. The April fall came mainly because electricity grew cheaper; the July narrowing because gas grew dearer. The two have different causes, yet both push the ratio down. Electricity costing more per unit than gas is normal everywhere; what is abnormal is the sheer size of Britain\u2019s gap. Most of Europe sits at around 2 to 3 times, while Britain has long hovered near 4 to 5. Narrowing to 3.6 is a step back towards the level common across the continent. And for any household weighing a switch to electric, that headline gap is not the whole story.<\/p>\n\n\n\n
What matters is heat-pump efficiency and time-of-use pricing. A properly installed air-source heat pump has a seasonal performance factor of roughly 3 to 5, so each unit of electricity it draws delivers 3 to 5 units of heat, which on the flat cap rate already puts the cost of heating level with gas, and a high-performing unit ahead of it. Paired with a tariff built for heat pumps, such as Cosy Octopus, which drops to around 13p in off-peak windows, the cost of heat falls to 3 or 4p; for households with an electric car, Intelligent Octopus Go brings the overnight whole-home rate down to about 8p. Add solar panels and a home battery to store daytime generation and cheap overnight power for later use, and the bill falls further still. An induction hob tells the same story: nearly all the energy reaches the pan, whereas a gas hob loses close to half its heat to the air. Together, this lifts a household\u2019s energy out of a market a distant war can move, onto the electricity side, where the rise is smaller and the ground steadier.<\/p>\n\n\n\n
So is it reasonable to load the increase almost entirely onto gas while electricity barely stirs? It is, and more so than it first appears. The cap exists to let suppliers recover their efficient costs and no more, enough to stay solvent without overcharging, and the wave of supplier collapses in 2021 happened precisely because prices had been held below cost as wholesale prices surged. A cap that reflects true costs, letting expensive gas be expensive and cheaper electricity be cheaper, is honest accounting rather than an arbitrary carve-up.<\/p>\n\n\n\n
Look deeper, though, and it is Britain\u2019s old arrangement that was the unreasonable one. For years the levies that fund wind, solar and other low-carbon schemes, together with the cost of social support programmes, were piled overwhelmingly onto electricity bills, while gas burned at home escaped almost all of them, and generating electricity carries a price for its carbon while heating a home by burning gas does not. Analysts have called this a reverse carbon tax, penalising the clean fuel and sparing the dirty one, inflating the ratio of electricity to gas and making heat pumps look dearer than they really are. Why did April\u2019s electricity rate fall? The answer is here: the government removed a long-standing levy from power bills, the cost shifting off electricity from April, and that quarter\u2019s cap eased as a result. Now that gas absorbs the full increase, with that levy shift alongside it, 2 forces with different causes are pushing the distorted ratio back towards something rational. Keeping gas expensive when gas is expensive, while lifting costs that never belonged solely on electricity, is not an extra burden. It is a return to a more sensible basis.<\/p>\n\n\n\n
The real message of this increase is not the 13 per cent, but the crack between 5 and 24. The wider that crack, the further Britain\u2019s electricity has escaped a global gas market it cannot control. A single conflict in the Middle East can still send gas bills up by a quarter in a single quarter, but it can no longer drag electricity up with them. The more thoroughly Britain moves its grid off gas, the wider that crack grows, and a fully electrified home need no longer pay for a war far away.<\/p>\n","protected":false},"excerpt":{"rendered":"
Britain\u2019s July price cap lifts gas bills by 24 per cent but electricity by only 5. The widening crack between the two shows how far the grid has escaped gas, why electrifying now pays, and why loading the rise onto gas restores a more rational basis.<\/p>\n","protected":false},"author":2,"featured_media":3078,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"categories":[81],"tags":[1506,1544,318,1547,614,1545,1546,1548],"class_list":["post-3079","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk-affairs","tag-electricity-prices","tag-energy-price-cap","tag-energy-transition","tag-gas-prices","tag-heat-pumps","tag-ofgem","tag-spark-gap","tag-time-of-use-tariffs"],"yoast_head":"\n