UK Business Energy Costs After the Crisis

In January 2022, a UK business renewing a standard gas contract was paying in the region of 300–400p/therm — six to eight times the pre-crisis norm. Electricity contracts were following wholesale prices that had never been seen in the modern UK market. Three years on, the same business renewing in January 2026 is paying roughly 70–90p/therm for gas and 18–22p/kWh for electricity on a standard fixed all-inclusive contract. Prices are materially lower than the crisis peak. They are not, by any historical standard, cheap.

Understanding what has changed, what hasn’t, and why the pre-2021 price environment is not returning is the essential context for every procurement decision being made in 2026.

Where prices have come from and where they sit now

The 2021–22 crisis was driven by a sequence of compounding factors: low European gas storage entering the 2021–22 winter, below-average Norwegian supply, the progressive withdrawal of Russian pipeline gas in advance of the Ukraine invasion, and LNG demand competition from Asia recovering from the pandemic. At its peak, UK gas spot prices briefly touched 600p/therm in December 2021. The subsequent fall has been substantial but uneven.

By 2023, prices had retreated significantly as LNG supply expanded, European storage recovered, and demand moderated through a combination of efficiency response and mild winters. 2024 brought further easing, with UK gas front-month contracts settling into the 70–100p/therm range for most of the year. Electricity followed, moderated by the continued expansion of renewable capacity reducing the frequency of gas-only price-setting periods. The current level — roughly three to four times pre-2019 averages — reflects the structural cost increases embedded in the post-crisis supply landscape, not a temporary dislocation that will unwind further.

What the structural shift means

The UK energy market of 2019 and earlier was characterised by adequate domestic North Sea supply, cheap Russian pipeline gas into European interconnected markets, modest LNG import requirements, and a geopolitical environment that treated European gas supply as essentially a technical rather than a security question. All four of those structural conditions have changed permanently or for an extended period.

North Sea gas production has continued its long-term decline. Russian pipeline gas to Western Europe is functionally gone. LNG import dependency is now structural for the UK, exposing domestic prices to global market competition in ways that were only marginal before 2022. And the geopolitical risk premium — reflecting Strait of Hormuz exposure, Red Sea shipping constraints, and Middle Eastern instability — is now embedded in UK forward market pricing as a permanent feature rather than an occasional spike.

The practical conclusion for UK businesses is that energy budgeting for 2026 and beyond should be anchored to current price levels, not to pre-crisis norms. A business that spent £40,000 per year on energy in 2019 and is now spending £90,000 should plan around £90,000 — not around expectations of a return to £40,000 that the structural market position does not support.

What has improved

The crisis produced a genuine and durable market response. UK electricity generation has continued to decarbonise, reducing the frequency with which gas-fired generation sets the marginal price. Offshore wind capacity additions in 2023–25 have been substantial, and high-wind periods now produce wholesale electricity prices that would have been considered floor prices in 2022. Battery storage deployment has accelerated, improving grid flexibility. The supplier landscape has consolidated significantly — the sub-scale, undercapitalised operators that failed in 2021 have not been replaced in kind, and the remaining suppliers are better capitalised and more robustly hedged.

For businesses, the efficiency response to the crisis has also been meaningful. Many SMEs that had never previously focused on energy management invested in LED retrofits, heating controls, and consumption monitoring during 2022–24 when the financial case was undeniable. Those investments produce ongoing savings that partly offset the higher base price environment.

The procurement connection

Three years of elevated prices have changed the business case for active energy procurement. In 2019, the difference between a well-managed and a poorly managed contract might have been 10–15% of a relatively low base bill — worth doing, but not urgent. At current prices, the same percentage differential represents two to three times the financial impact. A business spending £120,000 per year on energy and paying 15% above the competitive market rate is overpaying by £18,000 annually. That number tends to focus minds in a way that the pre-crisis equivalent did not. Telnergy has spent three years managing contract renewals through one of the most volatile energy market periods in modern history. The lesson from that experience is consistent: the businesses that came through the crisis best were those that had their contracts in order before it started, and those that moved quickly when the market provided renewal windows at better rates.

📱 WhatsApp: 07360 272168 | 📧 hello@telnergy.com | 📞 01202 028888 Telnergy Limited · Independent commercial energy consultancy since 2002 · Ofgem registered TPI · ADR Ref E3561 · CRN 04576876 · Christchurch, Dorset

FAQ

We’re still paying 2022 crisis-era rates on a long contract. When should we move? Calculate your exit fee and compare it to the saving from switching to current market rates for the remaining term. At current market levels, a business fixed at 2022 peak rates — 35–40p/kWh electricity or 300p/therm+ gas — has almost certainly reached the point where the exit fee is smaller than the accumulated saving from switching. This calculation is straightforward and Telnergy can run it from your contract documents within 24 hours. Don’t assume you’re stuck without checking the arithmetic.

Will energy prices return to pre-2021 levels? The structural factors that supported low pre-2021 prices — plentiful North Sea gas, cheap Russian pipeline imports, minimal LNG dependency — have either reversed or disappeared permanently. A return to £40–£50/MWh electricity or 30–40p/therm gas is not supported by any credible market analysis. Planning budgets on that expectation creates financial exposure. The current 70–100p/therm gas and 18–22p/kWh electricity range is the realistic baseline against which efficiency investments and procurement strategy should be evaluated.

What’s the most important thing a business should do differently in 2026 compared to 2019? Treat energy procurement as a managed function rather than an administrative task. In 2019, auto-renewal and passive contract management was a modest overpayment. At current prices, it represents a material and entirely avoidable cost. The mechanics are the same — active tender process, full supplier panel, competitive quote comparison, contract renewal managed ahead of the notice window — but the financial consequence of not doing it is two to three times larger than it was before the crisis.

Telnergy Limited is an independent commercial energy consultancy established in 2002, based in Christchurch, Dorset. Ofgem registered TPI · ADR Ref E3561 · CRN 04576876.