It's time to change UK energy pricing - Richard Murphy Tells The Truth on Energy Prices

26th February 2025

There is a dimension to the energy price issue which is not discussed at all, which massively impacts the way in which domestic energy is priced in the UK. The rules are set by Ofgem, the government regulator. These prices are set to make matters as bad as possible for everyone but energy companies.

What follows is a little technical. I have checked the facts with energy expert Mike Parr, to whom I am grateful, whilst accepting that all remaining errors are mine alone, having said which I think all that follows is true.

It's important to remember that the goal of energy regulation in the UK is to preserve the privatised energy ‘market', whatever else is claimed. In essence, everything it does is meant to ensure that at least some of the companies engaged in this ‘market' do not fail.

The way it sets energy prices reflects this. There are lots of ways to generate electricity in the UK. Renewables, nuclear, coal, hydro and gas all play a part. Most are used, except coal, which is now only in emergency use.

The cost of generating electricity using these various methods varies greatly. For example, using gas at current spot market prices costs about £611 per megawatt hour (MWh) right now. Other sources cost about £60/MWh for nuclear, £50/MWh hydro and in the range £50 to £140/MWh for on and offshore wind and PV. Those are big differences.

The electricity we actually get delivered to our houses is from a mix of all these sources. It is total nonsense, for example, that anyone supplies pure renewable electricity. All electricity from all generating sources is mixed together when it goes down the wires to our houses.

Bizarrely, however, that's not how the price is set. The wholesale price of electricity in the UK is set on what is called a ‘marginal costing' basis. This is much beloved of economists but is working against the interests of all consumers of fuel right now.

Read the full blog article HERE to see how the consumer is being robbed by energy companies with help from government rules.