The impact of the energy price crisis on UK customers

In April 2022 consumers in the UK saw a 54% increase in the energy price cap because Russia invaded Ukraine in February that year. This sent wholesale gas prices spiralling across Europe and caused significant problems for both suppliers and consumers.

Using data for around 13000 households from the Smart Energy Research Lab, researchers Victor Ajayi, Andrew Bulinson, Monical Giulietti and Michael Waterson investigated the implications of ‘shocks’ such as this on UK households between 2021 and 2023.

By analysing the behaviour of households who remained on fixed-term contracts compared to those who were forced to move to a variable tariff by external events, the team established a link between price variations and changes in consumption.

The research found that those customers who were moved to a variable tariff reduced their consumption significantly, but this was in addition to the general reduction brought about by the unprecedented price increases of winter 2022/23.

Before 2021 there were many domestic energy suppliers in the market which were unprepared for the fuel price rises following the end of Covid-19 restrictions. The inability to increase retail prices above the regulatory price cap caused many suppliers to collapse. This left two-million households with no option but to switch to alternative suppliers and from fixed term to standard variable tariffs.

Professor Mike Waterson, CAGE Impact Director said:

“Our research focuses on two major events which had an impact on gas and electricity consumption. The wave of energy suppliers leaving the industry in October 2021 forcing households to switch both supplier and tariff, was exacerbated by the invasion of Ukraine in February 2022.

“It is important for policymakers and energy companies to understand how unexpected and sustained increases in energy prices are experienced across society to be able to deal with the consequences more effectively. Consumers also need to be made aware of the system changes required to ensure that energy security and environmental objectives are met.”

• Read the full paper: The impact of the energy price crisis on GB consumers: a difference-in-difference experiment