Energy bills could overtake mortgage repayments by 2025

First Utility has issued a stark warning about the future of energy prices.

Gas and electricity bills are on course to become our biggest household expense.

That’s according to energy company, First Utility, which has found the annual cost of energy could soon exceed what some people pay towards their mortgage each year.

It’s warning that should prices keep increasing at the same rate they will exceed average annual mortgage repayments in some parts of the country by 2025.

How could it happen?

First Utility’s analysis of Ofgem data found that the cost of gas and electricity has risen by 8.5% in each of the last five years, leaving us with an average annual dual fuel energy bill of £1,420.

At the current rate, in 12 years’ time an energy bill might reach £3,761 – which is £125 more than the typical annual mortgage repayment in Stoke-on-Trent.

By 2029 the soaring cost of energy could mean an annual energy bill reaches £4,808, surpassing average yearly mortgage repayments of £4,776 for homeowners in Liverpool by £32.

And just one year later, in 2030, homeowners in Norwich and Birmingham will be in the same boat; paying £223 and £103 more respectively for energy than their mortgage that year.  

Who will be to blame?

First Utility’s grim prediction for future price rises assumes average annual mortgage repayments stay the same for the next 30 years and energy bills rise in a uniform manner.

That may seem like a stretch, but the energy company says it’s quite a likely scenario if interest rates remain low, our consumption behaviour stays the same and Government energy policies don’t change.

Everyone else, it seems, will be to blame but the energy companies.

Shifting blame

Back in April First Utility joined the long line of energy companies to hike prices by announcing an 18.6% price rise.

Though the level of hikes varies between companies, the increased cost of wholesale gas and oil was used by all as the reason for driving prices up, as well as the cost of implementing Government energy policies.

First Utility believes the cost of updating outdated infrastructure, subsidising energy efficiency measures, implementing renewable energy schemes like wind farms and an unfair energy market that lacks competition will contribute to the potential future price rises it predicts.

But Government figures tell a different story.

Opposing figures

While First Utility’s data suggests dual fuel energy will cost £2,505 by 2020 - rising by over £1,000 compared to current costs - the Government predicts energy bills should only rise by £76 by 2020.

The smaller change is dependent on the take up of Government policies like the Green Deal loan scheme .

The Department of Energy & Climate Change (DECC) published a report earlier this year where it predicted energy bills are likely to continue on an upward trend, with or without policies, as a result of rising wholesale energy and network costs.

The report looked at the impact of Government energy and climate change policies and found that increased costs of £268 would be greatly outweighed by the eventual savings of £452 by 2020.

In all the Government’s energy-saving policies, like better gas boilers, tighter building regulations, the Green Deal loan scheme and smart meters could save householders around £166 a year by 2020.

Limiting the impact

Whoever’s to blame one thing we can’t deny is that energy bills are rising and one solution is to be more energy efficient.

Ian McCaig, CEO at First Utility said: “To address the inevitability of energy price rises, two things need to happen: We need industry reform to level the playing field and encourage more competition and we need to help consumers reduce their energy usage and get more efficient.”

Strangely the boss at First Utility is actually encouraging us to use less energy. He added:

“First Utility has an entirely different mindset to the Big Six in that it wants consumers to actually use less energy and helps them find ways to do so, giving people real and tangible ways to use less energy and lower their bills.”

First Utility was  the first UK energy supplier to offer smart meters to all its customers in 2008. In 2012 it launched my:energy, an online analytics service which provides households and businesses with personalised information regarding their energy usage.

The cheapest energy deals

As well as becoming more energy efficient in your home you can also make sure you are on the most cost effective energy tariff.

Here are the top cheapest energy tariffs around at the moment:

* Saving calculated against an average bill as decared by OFGEM in winter 2013 (£1,420)

All calculations are for an average usage dual fuel household paying by monthly direct debit. Average usage as defined by OFGEM is 16,500 kWh pa of gas and 3,300 kWh pa of electricity

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