This morning has opened with really bad news for those who use electricity in the UK. As is sadly so often the case it comes from a regulator that in theory is supposed to protect consumers so let me hand you over to this morning’s announcement from Ofgem.
Energy network companies have been given the green light for multi-billion-pound funding to strengthen the stability, security and resilience of our energy networks. This investment will upgrade power and gas grids, creating a future-ready system that better shields customers from volatile energy bills.
I am sorry to have to tell you that “better shields customers from volatile energy bills” is at best misleading and if you are less kind a lie. For those who follow such things the use of “future-ready system” by such a body means something very expensive is in the words of Kate Bush running up that hill and here it is.
Most of the funding (£17.8 billion) announced today will go towards maintaining Britain’s gas networks, keeping them among the safest, most secure and resilient in the world.
This essential investment ensures a safe and reliable energy system for years to come.
Having become used to the word machinations of central bankers I have highlighted the word among as that is their get out clause should it prove not to be so. At least they did not describe it as resilient as banks described so have this awful habit of collapsing. Also there is a bit of deflection going on here as this is about the gas network which supplies most of UK heating as well as quite a bit of its electricity ( 15.5GW or 38% as I type this)
But then we get to the real point as they do not put it like this but there were always going to be expensive bills because UK Wind Power is a long way away from the main places of us. As opposed to the past where for example we had something not far from me Battersea Power Station.
The remaining initial investment (£10.3 billion) will strengthen our electricity transmission network, improve reliability and expand capacity to support the electrification of the economy and drive growth.
Together this £28 billion commitment will rise to an estimated £90 billion by 2031 across both gas and electricity networks.
You may note that £17.8 billion on Gas has morphed into £90 billion on Gas and electricity with the awful felling that it means some £70 plus billion on electricity. Here is their estimate of what individual UK consumers will have to pay.
In total £108 will be added to bills by 2031. £48 for gas and £60 for electricity. Alongside maintaining grid resilience this investment will deliver significant savings of around £80 compared to not expanding the grid.
Notice they are also copying the central bankers in providing a counterfactual. Their Ivory Tower has not doubt been busy making up numbers that come with no justification or explanation or what is called in modern language “trust me bro.”
The next bit is a triumph but only in their version of an Ivory Tower.
Electricity grid expansion alone is expected to reduce bills by £50 by 2031, thanks to lower reliance on imported gas and the halting of constraint costs ensuring power flows efficiently from where it’s generated to where it’s needed, even at peak demand. In short, investing now is cheaper for consumers than delaying, and electricity grid investment more than pays for itself.
Notice how rises in bills are for now whereas the promised reductions are years away. At least they did not explicitly call the rise in bills temporary! In fact if the grid investment “more than pays for itself” then surely bills will not have to go up at all?
There is one possible upside in that the three Scottish wind farms that usually are not connected to the UK Grid due to capacity constraints might stop charging us for power we do not use. Of course that is another dreadful critique of this useless regulator.
Gas prices are falling
This is the next stage here and there was a hint in the latest price cap from Ofgem.
Energy regulator Ofgem has today (Friday 21 November) announced a 0.2% rise of the energy price cap for the period covering January to March 2026.
This hid rather a can of worms and I note another failure from Ofgem which “forgot” to mention this explicitly in its press release. This is that gas prices had fallen.
Wholesale prices – which make up the largest portion of the bill – are currently stable and have fallen by 4% over the past three months.
They do eventually get to a version of the truth.
The price cap change is driven by government policy costs and operating costs. This includes funding government’s Sizewell C nuclear project (around £1 per month) which will bring more clean power.
As you can see they again deflect by blaming nuclear which is expensive but is a scapegoat here.
The real issue is that if it is Gas prices which have driven UK electricity prices higher then they should have fallen this time around. So a 4% drop rather than a 0.2% rise. In even worse news for those who have bought all the spinning here Gas prices are continuing to fall.
UK Natural Gas prices plunge to another 12-month low. Yet the energy price cap is going up in January. ( @7kiwi)
The hopeful news about a possible peace settlement for Ukraine is the driver here this week. So at this stage the Rolling Stones were right to call it a “Gas,Gas, Gas.” Or as David Turver puts it.
UK gas prices are competitive with continental Europe, so contrary to popular belief, it cannot be gas driving our high electricity prices.
North Sea Oil and Gas
The UK government is determined not to use this and instead prefers to let Norway do it and then us import it.
UK government keeps the “windfall” tax on the country’s North Sea oil and gas industry until March 2030. The headline tax burden for the industry stands at ~78%. Windfall has an interesting meaning when Brent is struggling to stay above $60 a barrel. ( Javier Blas)
There is not only direct economic damage here. But also more indirect as we make our energy supply ever less secure and to a large extent outsource it to Norway and the US.
The UK’s largest oil and gas producer has announced plans to axe 100 North Sea jobs as a direct result of Rachel Reeves’s Budget.
Harbour Energy said the Chancellor’s refusal to make concessions on the windfall tax meant deep and permanent cuts to its UK workforce were necessary. ( Daily Telegraph)
Didn’t the UK Budget reduce electricity bills?
It did but it was really a sleight of hand as the costs were simply shifted from domestic bills to general taxation. So to be an outright winner you need to be not paying taxes.
It was announced there’s be ‘£150 off a typical bill on 1 April 26’, all other things remaining equal. Good news. ( Martin Lewis)
But there is even a problem here as remember that Gas prices are falling so if Energy Minister Ed Milliband is right then we would expect a fall in the price cap in April? Er no.
Yet the ‘other things remaining equal’ is doing quite a bit of heavy lifting. I’ve just got the new predictions for the April Price Cap, which is a cut in cost of 4.2%. Without the Budget changes, it would be predicted to be rising 3.5%. ( Martin Lewis)
Notice that otherwise the price of domestic energy would have risen in spite of the Gas price fall. Was that the real reason for the change? To cover up what is becoming ever more obvious.
Also before this the “EU Reset” of Prime Minister Kier Starmer had raised UK electricity prices.
In October 2025, they estimate fuel costs of £53.88/MWh and carbon costs of £27.31/MWh or 33.6% of the total. It is worth noting that carbon costs have risen 37.7% from £19.84/MWh in January of this year. This is because the Prime Minister has signed us up to the EU Emissions Trading Scheme where carbon costs were much higher than the UK. This has the effect of pushing up our costs of electricity. ( Eigen Values)
Comment
This has been a crisis long in the making as both the political and media classes have claimed for years and years that renewable power is cheap. Whereas even the Wall Street Journal has moved on.
Yet this morning the regulator Ofcom told us this.
Investing now to maintain world class resilience and expand grid capacity is the most cost-effective way to harness clean power, support economic growth.
Yes the same economic growth that these policies have crippled. Even Zipcar a cheerleader for EVs has decided it is all too expensive now
Soaring EV fleet insurance/electricity costs and the new £13.50 London Congestion Charge for EVs are major factors. ( City AM)
