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Energy prices and their effect on households

With two-thirds of adults seeing their cost of living rise in the last month, the ONS article published today on energy prices and their effects shows how lower income households may be hit disproportionately by rising gas and electricity bills.

  • Wholesale gas prices are around four times higher than in early 2021, with consumer prices for gas and electricity rising by 17.1% and 8.7% respectively last October

  • This followed a 12% rise in the Office of Gas and Electricity Markets (Ofgem) energy price cap last October.

  • The price cap, which limits prices consumers on default tariffs can be charged for their energy, will be reviewed again this month.

Any further rises may disproportionately affect lower income households, as they spend a higher proportion of their income on utility bills and are more likely to be in fuel poverty.

Read the ONS article

The cost of living is rising for households across the UK, with energy prices a major contributor. This article explores how households are being affected by these rises, including a disproportionate impact for those on lower incomes.

The wholesale price of gas is currently around four times higher than in early 2021, with significant rises through the latter half of the year, and, with gas also used to fuel around a third of the UK’s electricity generation, rising gas prices have in turn led to rising electricity prices. Gas and electricity inflation rates are also at record high levels.

After the energy price cap rose in October, consumer prices for gas and electricity rose by 17.1% and 8.7% respectively, and costs could rise even further when the new rate is implemented in April.

Main points

  • While rising energy prices will affect most households across the country, they are more likely to disproportionately affect those on the lowest incomes who typically have less flexibility in their spending and are more likely to be in fuel poverty.
  • Spending on gas and electricity is also higher as a proportion of disposable income for the poorest 10% of households (7%) compared to those in the richest 10% of households (2%).
  • According to data from our Opinions and Lifestyle survey (OPN), two thirds (66%) of adults in Britain report their cost of living increased in the latest month (December 2021 to January 2022), with 79% of those citing higher gas and electricity bills.
  • Almost a third (32%) of those who said their cost of living had risen are cutting back on their use of fuel such as gas or electricity. More than half (53%) said they were spending less on non-essentials, and around a quarter (26%) using their savings.

Go to further ONS release