Higher Electricity and Gas Prices Ahead?

Although wholesale prices have stabilised since the Ukraine invasion, the UK will likely see an uptick in bills for the foreseeable future.

Centrica, which owns British Gas, has said that it’s most likely that domestic customers and business users will see prices increase. As the wholesale gas price drives all energy costs in the UK, it affects both electricity and gas bills. Increases are likely in the medium and longer term due to investments required in the UK infrastructure and the volatile wholesale energy market. The effect is that energy prices in the UK are among the highest in the world.

High prices are here to stay from net zero costs

Rachel Fletcher,  director of regulation at Octopus Energy, said to the parliamentary Energy Select Committee in October 2025 that “If we continue on the path we are on, in all likelihood electricity prices are going to be 20 per cent higher – even if wholesale prices halve“. These additional costs are all due to various levies imposed by government policies to support their drive to Net Zero.

Although Ofgem set a maximum tariff through the Energy Price Cap, some electricity suppliers have deals that beat this price.

In the past few years, many energy companies have hedged energy prices, helping the company giant to generate a 51% increase in profits. However, changes in the marketplace and the need for improvements in renewable energy sources may lead to higher prices ahead.

The news comes on the back of the announcement that, on average, energy companies in the UK now make £105 per customer per year, a massive increase from £75 last year. The industry regulator Ofgem wants to reduce this margin so that any savings made from the whole market are actually passed onto the end customer, whether they are in homes or businesses.

More investment means lower margins and higher bills

The government and Ofgem have set targets for each home in the UK to be fitted with a smart meter in the near future. Additional funding means millions of homes have loft and cavity wall insulation installed. Homeowners are not making this considerable investment; the energy companies themselves are. However, the consumer is effectively paying for these changes through additional costs on their energy bills.

To prepare for this investment, British Gas is now heavily recruiting installers. It aims to have an additional 1,100 people fitting insulation products and 2,600 people fitting the smart meters in homes across the UK.

Hiring staff with technical knowledge will not come cheap, but fitting insulation in homes will reduce home energy consumption, so this may dampen the need for energy. The installation of smart meters will mean that energy usage data is transmitted directly back to the company that manages your supply, so you will never have someone rereading your meter, and that will be the end of estimated bills at long last.

Additionally, you’ll be able to see your consumption figures on your utility provider’s website or using some other form of desktop software so that you can manage your own usage. Research suggests that doing this can shave around 10% off your energy bills each year.

As we see more press-related stories in this arena, you can only think that the publicity being generated is purely because prices will have to rise. The companies are paving the way early enough so they don’t hit us when we least expect them. Should you fix your prices now? Well, we don’t believe that should be the case.