Energy prices soar in Britain. Can Canadians expect to pay more too? – National

October will bring shock for many in Britain.

At the start of the month, U.K. residents will see an 80 per cent increase in their annual household energy bills, the country’s energy regulator announced earlier this month, following a record 54 per cent spike in April. That will bring costs for the average customer to 3,549 pounds ($5,418) a year from 1,971 pounds ($3,009).

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The price increase is being blamed on Russia’s war in Ukraine, which is driving up the wholesale price of natural gas. and is being felt across Europe. The U.K., however, has the highest inflation rate among the G7.

And with Moscow reducing the flow of fuel to Europe, many nations are moving to save energy supplies ahead of the winter. Across the pond, Canada has offered to help Europe with its energy woes, but will the overseas crisis impact energy prices here at home?

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“Energy prices, both oil and gas, are commodities so when it goes up in one place around the world, it goes up in another place around the world as well,” said Opher Baron, a professor of operations management with the Rotman School of Management at the University of Toronto.

“I hope that the increase is not going to be as significant as this is reported to be (in Britain), but it’s certainly something that will have a spillover effect to our markets as well.”

What’s going on in Britain and Europe?

The price warning from Britain’s energy regulator comes as Europe prepares to shore up its energy reserves ahead of the winter.

Many nations are doing so in response to a reduction in Russian gas flows. The West has accused Moscow of using energy as a weapon of war in response to its economic sanctions imposed over the Ukraine invasion. In 2021, about 45 per cent of natural gas imports to the EU came from Russia, the International Energy Agency says, while four per cent of gas used in the U.K. in 2021 came from Russia.

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Jennifer Jones sorts her bills at her small flat in London on Aug. 25.


Frank Augstein/AP

European nations like Germany and Spain have imposed measures to reduce energy use now in order to preserve supplies for the colder months. Those include air-conditioning and heating limits, as well as the dimming of lights overnight. The benchmark European gas price has soared 550 per cent in the past 12 months.

But in the United Kingdom, rising energy prices are adding another stressor on top of a growing cost-of-living crisis.

This winter, Britons will spend an average 10 per cent of their household income on gas, electricity and other heating fuels as well as domestic vehicle fuels — twice the amount in 2021, according to Carbon Brief’s calculations of official data.


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U.K. charity National Energy Action estimates 8.5 million British households could be in fuel poverty after October when Britain’s cap increases, up from 4.5 million last October. Annual bills are expected to rise again in January to $6,000.

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The energy increases, together with rising food costs, are expected to push inflation above the 40-year high of 10.1 per cent recorded in July and trigger a recession later this year, the Bank of England has predicted.

“It’s a frightening one,” Baron said of Britain’s energy prices.

“It just shows the potential impact of energy prices and the economy in general from the war in Ukraine.”

How will Canada be impacted?

Canadian homes are powered by various sources of energy, including hydro, natural gas and petroleum.

Despite the crisis overseas, Canada is in a secure position in terms of energy supply, a spokesperson for Natural Resources Canada told Global News in an email.

The department didn’t elaborate on price projections, but said Canada has a “market-based energy policy that accepts global prices as the basis for the energy sources that heat our homes.”

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Many factors impact the price of energy, including transportation, extreme weather, global crises and high demand. Provinces and territories regulate energy pricing, but Ottawa will continue to work to “make life more affordable for Canadians,” it said.

When it comes to natural gas in Ontario, high demand is anticipated to continue for “some time,” an Enbridge spokesperson told Global News in an email.

Since the onset of the war in Feb. 24, the average annual bill for a typical residential customer in Ontario has increased by roughly $420 a year to $1,458 per year, Enbridge said. The company has been working with the Ontario Energy Board and the provincial government to soften the impact on customers, and is “well-positioned” to access natural gas supplies, the company added.


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North America has plenty of natural gas, but the export market can influence prices at home, said Heather Exner-Pirot, a senior fellow with the Macdonald-Laurier Institute.

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“The United States at least is able to export it, and so as much as they can export they’ll get a better price overseas, the prices domestically will start to go up,” she said.

Furthermore, the transition to a green economy due to climate change will impact energy prices now as it’s not cheap to switch off of fossil fuels, said Xianguo Li, a professor in the department of mechanical and mechatronics engineering at the University of Waterloo.

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It’s not clear what energy prices will look like, but with Canada being a nation of vast natural resources, price fluctuations should not be as drastic as they would be in other places, Li said.

“Canada has enough energy supply. In fact, we are an energy export nation so if we get to that worst situation, we should be supplying sufficiently for the domestic market,” he said.

“The only thing is in the international market you have the tendency to make more money, so the price will be kind of going up somewhat.”

How can Canadians save on energy costs?

When it comes to energy costs, there are ways to save, Exner-Pirot said.

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She said Canadians can explore using less energy by lowering the heat a degree or two, and by perhaps investing in insulation or energy-efficient renovations that benefit from incentive programs like solar panel installation.

“In one way, it’s good for incentivizing conservation of energy but that comes at a severe cost for low-income Canadians,” Exner-Pirot said.

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The transition to a green economy should bring about cheaper energy bills, said Li, adding Canadians in the interim should look at reducing consumption where they can.

“If every Canadian just paid attention to their daily routines, that’s a substantial potential for us to save energy and lower the total demand,” he said.

“That will also improve the energy security.”

— with files from The Associated Press and Reuters

© 2022 Global News, a division of Corus Entertainment Inc.

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