Showing the uncertainty in the forecasts of domestic UK energy prices this winter
In the UK throughout July and August 2022, there were alarming forecasts in the media of how
high energy domestic energy bills could rise over the Winter. Some forecasts, for Spring 2023,
placed bills for households using a typical amount of energy at around £7,000-£8,000 per year.
I decide to work on a small personal project creating an interactive chart that communicated
some of the uncertainty around these forecasts. I thought this would be for a general audience.
Someone who is aware that energy prices are rising. Someone who is concerned about this. Someone
who does not have figures on the amount of energy they use to hand. Someone who knows how much
they pay each month for energy.
I worked on the interactive chart before the Government introduced a new cap on the price of
each unit of energy in September 2022. The new cap will mean that for households using a typical
amount of energy bills will be around £2,500 per year. This is high compared recent standards,
but much lower than some recent forecasts.
This Government policy change means the interactive chart I was working is now redundant. In
that the estimated monthly energy costs it shows are now totally inaccurate. I did want to share
where I had got to with developing the chart though. As I thought it was an interesting exercise
in communicating uncertainty.
Reading and using the chart
The first thing to do is to enter how much you paid in energy bills in August 2022. This was
used to estimate how much gas and electricity your household uses. In turn this estimate was
used as the basis for forecasting your energy costs over the Winter 2022/2023.
The black line shows a best estimate of how energy costs might change for you over the next 9
months (see explanatory note 1 on the chart). The line steps up every three months, because at
the time of creating the chart, that was how often energy prices were changed by energy market
regulators.
The unit each unit of energy had been set, by the energy market regulators, for
October to December 2022. So, there was less uncertainty in estimating monthly energy costs
over this period (explanatory note 2 on the chart).
From January 2023 onward however there was much more uncertainty over the cost of a unit of
energy to households (explanatory note 3 on the chart). This is shown by the red lines
(explanatory note 4 on the chart).
Each red line is based on one of the day-by-day forecasts made by Auxilione (an energy market
consultancy) over August and early September. These forecasts predicted for the next year how
much a household would be charged per unit of energy.
The best estimate (the main black line) is the average of the estimates shown by the red
lines.
The chart itself
This chart was created before the Government announced a new energy price cap early in September
2022. The figures shown on the chart are totally inaccurate.
How much was your monthly energy bill in August 2022?
£275
£100
£150
£200
£250
£300
£350
£400
£450
£500
£NaN
£NaN
£NaN
Estimated monthly energy costs (£)
1. A best estimate of monthly costs.
4. The red lines show the forecasts which were averaged to get the best estimate.