UK energy prices third highest in Europe

Paul Boughton

UK electricity is the third most expensive in Europe, after Denmark and Italy, and prices here have risen by 41.4 per cent over the last year - and by 80.5 per cent since 2001. These actual consumer costs are the findings of the NUS Consulting Group’s 2005-2006 International Electricity Report Cost Survey.

On a ‘Big Mac’ cost comparison*, which better reflects the cost of electricity in local price index terms, the UK has the highest electricity prices among the countries surveyed, with Italy coming a close second.

According to the newly launched UK Electricity Gas Monthly Pricing Trends Report also by NUS Consulting Group, early June saw wholesale electricity prices drop from 5.6 pence per KWh to about 5.2 pence per KWh, and gas prices made a similar retreat. But this is not likely to reverse the long-term trend identified in the global survey. This trend is based on actual wholesale costs to April 2006 in 14 comparable economies in the northern and southern hemispheres.

In the last 12 months, wholesale electricity prices in the UK rose from 4.1725p/ KWh in June 2005 to about 5.275 per KWh currently, with a high of 5.8875p/KW in April 2006. Gas prices have followed a similar trend, rising from 1.552p/KWh in June last year, to 2.192p/KWh this month, and a high of 2.335 p/KWh in April 2006.

The recent drop in wholesale prices was precipitated by a general pull back in the price of oil, preliminarily attributable to the recent easing of tensions between the United States and Iran, as well as recent indications of a potential economic global slowdown. Nevertheless, the UK Electricity Gas Monthly Pricing Trends Report warns that increased price volatility is a reality that consumers will have to endure for the foreseeable future. In Europe overall, there has been a double-digit increase in the wholesale price of electricity in the past 12 months, except in Germany where the increase was just above 9 per cent.

“While rising world petroleum prices are predominantly to blame, suppliers are also using this opportunity to increase margins,” said Richard Soultanian, UK-based NUS Consulting Group Managing Director. “The only development that might reverse this trend toward higher prices would be a global economic recession, the probability for which risen from nil to small. Whether such a slowdown actually occurs will depend heavily upon how China, which now is consuming a third of many of the world?s resources, confronts its rampant growth.

“We continually monitor the situation as part of the energy cost control services we provide our clients around the world,” he added.

The NUS Consulting Group is the world’s leading utility cost management firm, providing energy and telecommunication cost audit, analysis, procurement, online data management and consulting services to industrial and commercial organizations, operating around the world through 11 wholly owned subsidiaries and offices in North America, across Europe, in Australia and South Africa.

* Based on the local price of a McDonald’s Big Mac sandwich as of 1st April 2006 set against the price of 1MWh of electricity in a given country. This indicates the number of Big Macs in each country required to purchase one MWh of electricity.

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