Energy analyst Nathan Piper image: Investec
People will die this winter due to high energy prices, says Money Saving Expert Martin Lewis
People will die this winter because of the energy price cap rise, financial adviser and consumer campaigner Martin Lewis said today.
The cap come into effect for 24 million households in England, Scotland and Wales on default energy tariffs on 1 October, and will remain in place until 31 December, when it will go up again.
He called it a “genuine social and financial catastrophe that is putting lives at risk”.
Mr Lewis predicted a further 51 per cent rise in January.
He told BBC Radio 4’s Today Programme: “I’ve been accused of catastrophising over this situation.
“Well, the reason I have catastrophised is this is a catastrophe, plain and simple.
“If we do not get further government intervention on top of what was announced in May, lives will be lost this winter.”
The average household’s yearly bill will go from £1,971 to £3,549 from October.
The 4.5 million pre-payment meter customers, who are often the most vulnerable and already in fuel poverty, will see their average annual bill rise to £3,608.
Many will pay much more, he said.
“You could easily be paying £5,000 or £10,000 a year if you have high usage.
“I worry terribly for some of those who have disabled children or disabilities themselves who need lots of electrical equipment to keep their houses warm because of medical conditions.”
Mr Lewis said prices for many will be “unaffordable” in January.
He added: “The prediction now in January is up another 51 per cent on top of where we are now and that would take a typical bill and direct debit to £5,386 a year.”
Mr Lewis said a movement to refuse to pay energy bills is “growing”, as he called on the next prime minister to spend billions on tackling the crisis.
He said: “We must hope that once we have somebody in place, they will come up with a robust strong policy that we can all get behind that feeds people and heats people so we don’t have people dying because of these price cuts these winters.
“I suspect if it isn’t in place, then people coming from the Don’t Pay movement are going to become a louder voice in this country.”
Ofgem chief executive, Jonathan Brearley, warned of hardship this winter and said “there are no easy answers” to this energy crisis.
He told Good Morning Britain: “Genuinely, there are no easy answers, but there are some big decisions that ultimately ministers will need to make.
“To be honest I never imagined when I took this role that I would have to make an announcement that we made today.”
When asked about senior people in the energy industry receiving bonuses, he urged them to “be thoughtful” about their pay and remuneration.
He said the senior Ofgem team “has given away any bonuses to charity because we recognise the situation that we are in right now.”
An expert warned that sky high energy prices here for years to come and that the “era of cheap energy is over”.
Oil and gas analyst at Investec Nathan Piper said the UK will see gas prices remain high over the next few years, even if some of the current extreme costs ease.
The UK is becoming increasingly reliant on liquified natural gas (LNG), which is transported around the world on ships, he said.
This is naturally more expensive than gas piped across continents and will mean prices stay well above the historical average.
In 2017 the then Chief Secretary to the Treasury Liz Truss signed off on the erlier Cameron-Osborne proposal to allow the owners of British Gas, Centrica, to shut down the UK’s gas storage capacity because this government was not prepared to subsidise it.
The Rough storage facility had provided 70 per cent of the UK’s gas storage capacity for more than 30 years.
In the 10 years before the current gas crisis, prices averaged around 50p per therm – today it is closer to £6, a 12-fold increase.
“The crazy thing is we are experiencing record UK gas prices at the moment, in the middle of summer, which just doesn’t normally happen,” Mr Piper told Press Association.
He said that if you want to buy your gas in advance for 2025 at the moment you are still going to pay several times more than in the past.
Data from the Intercontinental Exchange shows that gas prices for the winter of 2024 and 2025 is trading at nearly 420p.
“For the UK, in particular, we are going to be more and more reliant upon LNG imports to satisfy our gas demand.
“And as a consequence, we will have to get used to higher gas prices into the long term,” Mr Piper said.
“I think we have to accept that we’ll have to endure much higher gas prices than we’ve been to.
“The era of cheap energy is over.”
For households this will mean incredible pain this winter which is unlikely to subside for years to come, he said.
The sheer longevity of the increase is the perhaps the most unusual part of this crisis.
“You occasionally get gas price spikes. So, for a very short duration, because you get a cold snap, Beast from the East, whatever it is, you get short-lived spikes in gas prices, and everyone goes ‘goodness me, look at that’,” Mr Piper said.
Afterwards things used to quickly return to normal. This is not happening now.
Prices were already rising before Russia invaded Ukraine, but since then the situation has worsened.
Problems in France’s nuclear plants have also pushed up the price of electricity, a hot dry summer has reduced power production from Norway’s rivers, and low water levels on the Rhine have made it harder to transport coal in Germany.
Asked what else could go wrong, Mr Piper said that LNG terminals might break down, and Russia could cut off its remaining gas flows to Europe.
“What we’re relying upon is that all the LNG terminals are able to produce gas.
“A lot of these terminals are running almost at maximum capacity.
“And if you run anything at maximum capacity, there is the issue that it could break down.
“The other thing is that the Russians could shut off the Nord Stream 1 pipeline completely.”
Gas prices spiked earlier this week after Gazprom announced it would shut the pipe for three days of maintenance next week.
“The question mark is will they turn it back on,” Mr Piper said.
What happens next remains to be seen.
“Blackouts will be avoided by what economists call demand destruction, where businesses and people cut their usage because they can’t afford to keep it up.
“Heavy industry across Germany across Europe elsewhere, is effectively shutting down because they can’t secure gas or electricity prices at anything like a competitive level over the next two or three years,” he said.
“If it was a spike, you’d go ‘oh this is terrible, but actually we can lock in competitive prices for the next two years and we can still produce fertiliser, cement, glass, whatever, at an economic price’.”
In comparison, US manufacturers are seeing much higher prices, but still far below what Europe is seeing, making them more competitive than European counterparts.