After months of record price levels, gas prices are finally coming down and Britons couldn’t be happier! As the cost of wholesale gas continues to fall in the UK and across Europe, millions of households are hopeful that it will transform to cheaper energy bills. But it’s unlikely that energy bills will get cheaper for anytime soon, according to experts.

Wholesale gas prices have fallen to their lowest level since May last year for different reasons but two factors stand out. First, the mild weather has led to a decrease in the demand for heating as households coupled with businesses trying to optimize their energy usage.
Second, many European nations have made significant efforts to fill their gas storage facilities with liquefied natural gas to lessen their dependency on Russian gas. This alleviates concerns about a supply crunch and potential regular power cuts. Even so, wholesale prices are still higher than pre-pandemic levels.

Despite the sharp fall in gas prices in recent weeks, it’s unlikely that Brits will see a corresponding drop in energy prices and it all boils down to how the energy market works.

Why falling gas prices doesn’t mean lower bills


Despite the optimism that energy bills will reflect falling wholesale gas prices, there are a few reasons why we may not see that happen any time soon.

Falls in wholesale gas prices may eventually lead to cheaper bills but this will only happen if the falls are sustained and if other factors do not lead to another bout of hikes. In other words, wholesale prices may not be passed immediately to consumers but it will eventually happen if the factors that determine your energy bills align.

Energy price guarantee

The Energy Price Guarantee is a temporal measure by the government aimed at protecting consumers from increases in energy costs by setting the maximum amount you will be charged for a kWh of gas and electricity. In effect, it absorbs the recent increased costs of energy so you get to pay less than you should while the government subsidizes the difference.

At the moment, the typical household bill is frozen to around £2,500 a year and it costs the government as much as £42bn to execute the scheme. With the recent price fall, the government will be the first to pay less in subsidies as experts forecast that the government may now spend less than £37bn.

What this means is that the impact of the drop will be felt only by the government initially. Consumers may see cheaper bills if the wholesale prices fall further and for that to happen, it has to fall below EPG levels (i.e. to around 34p/kWh for electricity and 10p/kWh for gas.)


Even if energy prices fall enough, it may still take until later this year for consumers to see reduced energy bills. The reason for this is that suppliers typically buy energy months in advance to comply with the cap, so it often takes months and months for changes in price to work their way through to consumers.

In most cases, suppliers have to buy gas and electricity at a specific price, for settlement on a specific date in future, which means they cannot reap the benefits of a reduction immediately. Suppliers buy a lot of gas and electricity ahead to protect their vulnerability to sudden price hikes. This process is known as hedging.

A look at historical data shows that the energy price cap rose several months after wholesale prices have decreased. Reductions will be felt in the same manner in which there was a delay in the energy price cap reflecting rise in gas price. On average, it takes around 6-9 months for wholesale prices to reach the final consumer.

So while gas rates have to drop further than it is now for consumers to get cheaper bills, any fall below the EPG level will take considerable time to feed into consumer bills. If you want to see how you can take control of your energy bills instead of waiting for factors to align, why not book a free assessment with us today? Click here!

Factors that influence electricity bill


Having discussed the prominent factors that determine the whether or not falling gas prices will result in lower energy bills, it’s important to have an idea of the factors that influence electricity rates. Understanding that what you pay for power is a combination of different factors will help you make critical decisions that will be beneficial in the long term.

While these factors vary across the globe, the common ones include the following:

Cost of production

The cost of generating electricity plays a vital role in determining energy bills. Like any economic goods, producing electricity requires land, labor, raw materials and capital. As a result, the cost of production comprises the price of the land, equipment, construction, grid connection, maintenance and operational costs. These, plus repair costs, have an impact on electricity bills.


Electricity prices are subject to the law of the demand. When demand goes up because of high consumption, so does the electricity rate. In summer and winter, demand for heating and cooling tends to rise, leading to a corresponding rise in energy prices. Research indicates that prices can rise up to 20 times the average rate when the weather is extreme.

While rain and snow can assist in cheaper hydropower generation and wind can provide low-cost electricity generation when wind speeds are favorable, changes in weather conditions can put pressure on other power sources, equally leading to high electricity bills.

Regulatory changes

In the UK, the prices of electricity are regulated by the Office of Gas and Electricity Markets (Ofgem). While suppliers buy their gas and electricity from the market in advance, Ofgem sets a maximum price suppliers van charge through a complex calculation and the price cap is updated four times a year.

Energy sources

Electricity prices are also determined by as how energy is generated. Some power generation methods are relatively more expensive than others. For instance, producing wind energy can sometimes be more expensive than generating power through traditional means. Generation companies that use wind rely on specialized equipment and work with specialists to operate the already expensive equipment.

Britain is currently the world’s biggest offshore wind power generator with more capacity than any other country. Our wind farm contributed a record 26.8% of the country’s electricity in 2022. This, among other reasons, explains why Brits pay more for their power than anywhere else on the planet.

Gas is an important part of today’s generation mix in Britain, contributing about 40% to the national grid. However, its price is currently affected by the war in Ukraine and a supply shortage in Europe. Unfortunately, prices may not become cheaper in the coming years, especially since gas is a finite, non-renewable resource. The implication is that consumers may continue to see increments in their electricity bills since the national grid is largely powered by gas.

In contrast, hydropower and solar power are rated the least expensive sources of electricity. Fortunately, the adoption rate of solar power has improved in the last few years as many homeowners use solar panels to trap energy from the sun, cutting huge energy bills. Want to see if solar energy can benefit you? Click here!

How technologies are changing the energy market

Technological advances are starting to shape the market by presenting solutions to the biggest problems in the energy industry globally. Although a significant part of today’s energy sources are non-renewable, the demand for power has soared over the years, ranging from air conditioning systems to heating systems, household appliances, consumer electronics and even electric vehicles.

The discussions about the future of the energy sector are now centered on sustainability, cost-savings and a green agenda. One of the technologies impacting the energy market today is solar panels. Not only is solar power renewable, homeowners and businesses can leverage it to cut their dependency on the national grid, and eventually lower their energy bills.

Also, solar panels are safe for the environment with zero emissions. Many Britons have started transitioning to solar energy to run their businesses and power their homes since the cost and installation of the systems have dropped dramatically over the years.

Another innovative technology that is in the spotlight is energy storage. The idea is to store the surplus of power generated from renewable sources so there is continued power flow despite the intermittent nature of wind or power sources. Although this technology is still at an early stage, experts believe it’s the missing piece in the renewable energy puzzle.

Following the government’s net zero commitment, spikes in energy prices and concerns about sustainability, experts believe that renewable energy is the hope of the future. This is already becoming a reality as a record 40% of the UK’s electricity in 2022 was made up of climate-friendly sources including solar, wind, biomass and hydropower. Apparently, we can safely say renewable energy sources have come to stay.

Bottom Line

High energy bills are a source of concern for most homeowners in the UK. If you’re one, you have probably hoped to see cheaper bills following the fall in gas prices but it may take several months for this to happen. What more, it’s unlikely that we will see energy bills fall to the pre-pandemic levels.

Given that energy rates have steadily been on the rise over the years, transitioning to solar is the best way for homeowners to protect themselves against expensive energy bills. The price of residential solar panels has dropped significantly over the years and now is the best time to make the switch. If you’re still not sure how solar power can help you save money, we encourage you to reach out to us for a free consultation. Click here!

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