The average cost of UK electricity prices have rapidly increased over the last few years and has reached new highs in 2022.
According to the UK government figures, the average price of electricity in 2021 rose to new highs of £765 annually. Whilst we do not yet have access to average electricity prices for 2022, we can look at Ofgem’s energy price cap for comparison as the majority of UK households are on the price cap.
What Electricity Tariffs Are Available?
With so many options, it can be confusing to navigate the best tariff for you. However, once you think about how you use electricity in your home or business, it becomes much simpler to choose an electricity tariff. You can pick from the following:
Fixed TariffsChoosing a fixed electricity tariff offers security surrounding the amount you pay to the energy supplier each month. This means that you have a set price for each unit of electricity you use. These tariffs offer protection against price increases. It’s important to note that your energy bills are based on consumption so they may appear to be higher during colder months. Energy suppliers usually average this cost out over the year. | Pre-Payment TariffsPre-payment tariffs allow households to purchase electricity in advance of using it. You can top up your electricity meter online, or in-store via a card or key. This is a great way to closely manage your electricity spending. It is important to note that unit prices are usually higher than other tariffs and there’s always the risk of running out of electricity at an inconvenient time. |
Variable TariffsA standard variable contract, as it is sometimes known, is very popular in the UK. Even though the cost of electricity goes up and down in line with the electricity market, there are no exit fees and you’re free to switch suppliers at any time. | Green TariffsMost electricity suppliers offer green tariffs providing you with energy from renewable sources. These tariffs can be either fixed or variable and are often cheaper than standard tariffs. |
Dual Fuel TariffsChoosing separate electricity and gas suppliers can create more admin, so many UK households select a dual fuel tariff for more convenience. Dual fuel tariffs can be either fixed or variable and may offer discounts, but this varies by supplier. | Economy 7 or 10Economy 7 & 10 tariffs are for those night owls who use more electricity at night. The cost of electricity is much cheaper after a certain time and the price per unit can fluctuate based on the marker price. |
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Electricity Prices In 2022
Energy prices have reached unprecedented highs. With the increase in wholesale energy prices, many UK households are struggling with what to do about their energy bills
New forecasts project that the energy price cap will increase by 65% in October 2022 according to Cornwall Insights. This means that a typical UK household will pay £3,244 per year for their energy from October.
The average household estimates are based on the usage of 12,000 kWh of gas and 2,900 of electricity.
How Much Is Electricity Per kWh UK?
The table below shows how the energy price cap has increased in 2022 alone. It is expected to increase again in October 2022.
| Unit March 2022 | From April 2022 | |
| Electricity Price Cap Price Per kWh | -20.8p per kWh -24.88p standing charge | -28.34p per kWh -45.34p standing charge |
UK Electricity Price By Region
We’ve broken down regional electricity prices per kWh so that you can better anticipate what price increases you’re likely to see.
All data comes from GOV.UK. While the regions may look a little strange they reflect the local Distribution Network Operator.
Why Is Electricity So Expensive In The UK?
Turbulent electricity prices have been caused by many factors at the same time. The largest impact on UK energy prices is increasing import costs. However, there are many costs involved in transporting gas and electricity into homes.
- Increased Demand – as the UK starts its recovery from the Covid-19 pandemic, the demand for global energy has soared.
- Weather – colder temperatures throughout winter and spring have led to increased gas usage to heat homes.
- Russia – the invasion of Ukraine has had a huge impact on energy prices as Russia is a major player in world energy markets.
Source: Ofgem 2022.
Why Do Wholesale Energy Costs Impact My Energy Bills?
You may think that UK energy suppliers are seeing increased profits but the energy price surge is largely down to the increase in wholesale energy prices. An estimated 60% of costs are taken up by wholesale prices.
The surge in wholesale prices has been so drastic, that it has caused a lot of UK energy suppliers to collapse or operate at a loss. Energy suppliers have little choice but to increase their prices to the cap level.
Who Is The Cheapest Electricity Supplier In The UK?
With the UK energy market changing rapidly, it is impossible to highlight who the cheapest supplier is at this moment. However, we can highlight the UK’s largest energy companies as classified by Ofgem, the energy regulator.
The UK’s largest energy suppliers are:
Business Electricity Suppliers
Business electricity is slightly different. Although still impacted by wholesale energy prices the market is more favourable for switching to a fixed rate tariff. Even with rising energy prices, many businesses are choosing to lock in energy prices to avoid future price increases. Business energy prices are not protected by the energy price cap.
Here are some of the cheapest business electricity available at the moment of writing. Please note that these prices are likely to have changed but this provides you with some ballpark figures. Overall consumption and industry can also impact electricity rates.
| Business Electricity Supplier | Unit Rate | Standing Charge | |
|---|---|---|---|
| EDF | 41.10p | 25p | |
| Opus Energy | 41.66p | 46p | |
| BG Lite | 56.92p | 45p |
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How Many kWh Per Month Is Normal?
What is seen as the normal amount should be a figure you aim for. Becoming more energy efficient and aware will help you reduce your energy bills. UK household electricity use has been dropping year on year with the advancement of energy-efficient appliances and more conscious consumption.
According to the Department for Business, Energy & Industrial Strategy (BEIS), the average UK household uses 3,721 kWh per year.
Fixed Or Variable Electricity Tariffs?
An energy tariff is how suppliers charge a customer for gas and electricity. Tariffs are made up of two costs, a unit rate and a standing charge. You can read more about energy tariffs here.
Fixed Rate TariffsA fixed rate electricity tariff means your unit rate and the standing charge will remain the same for the duration of your agreement. The annual overall cost of your electricity bill will depend on your consumption - only the price per kWh of electricity will be fixed.
| Variable Rate TariffsVariable tariffs mean your unit rate and standing charge can increase or decrease at any time. If you’re on this type of tariff, energy suppliers may change the price of your rates in line with wholesale energy prices.
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Are Economy 7 Electricity Tariffs Cheaper?
Economy 7 tariffs can be cheaper depending on your use of energy. For example, if the majority of your usage is during off-peak hours it may be cheaper to switch to an Economy 7 tariff.
Economy 7 hours differ depending on the electricity supplier. The most common hours this window falls on is between 10 pm and 8:30 am. You should consider this tariff carefully as it may end up costing you more as peak unit rates are often higher priced than other tariffs.
What Is The Cheapest Way To Pay For Electricity?
With rising energy prices, many people are exploring ways to save money on their energy bills. Despite the obvious tip of using less electricity, the way you pay your energy supplier may also impact the price you pay.
- Direct Debit: £754
- Pre-Payment: £757
- Standard Credit: £810
Should I Switch Electricity Suppliers?
Switching electricity suppliers is still a good idea if you can get a fixed-rate tariff that is cheaper than the future Ofgem price cap projections. The mindset has switched from saving money on your current deal to managing the price of your electricity bill against future increases.
For business energy customers, the mindset is similar. Whilst there is no price cap for business energy, prices are increasing and there are greater switching options for businesses looking to manage the cost of their energy.
How can I reduce my electricity bill?
Whilst switching your electricity supplier will save you the largest amount, you can change simple everyday habits to make sure you have some extra cash in your pocket every month.
| Turn appliances off at the wall Leaving your appliances on standby can kill all your electricity savings throughout the year. Make it a part of your night-time schedule or integrate it with your smart home schedule. The Energy Savings Trust estimates that the average household will save up to £80 a year with this simple change. | Old appliances? You may be reluctant to throw out an appliance that is still going strong, but if they have a poor energy efficiency rating, it could be the invisible money pit in your home. The Energy Savings Trust estimates that simply upgrading a fridge freezer to an A+++ model from an A+ will save you £300 a year. |
| Get a smart meter Keeping a watchful eye on your electricity usage can ensure your energy bills are not running away. It will be a reminder of how much leaving a light, TV or even appliances costs. You can use the smart meter to identify anything in your home that is driving up the cost of your electricity bills. | If you’re struggling to keep on top of your energy management, you want to choose a dual fuel tariff so you only need to switch energy suppliers once each year. Ready to switch? Get the latest prices |