Why are UK electricity prices so high? - Richard Murphy

20th March 2026

The UK pays the highest electricity prices in Europe — and it doesn't have to. In this video, I explain the electricity pricing scam at the heart of the UK energy crisis and why the government refuses to fix it.

Here's how it works.

Electricity is bought from multiple sources — wind, solar, nuclear, hydro, and gas. The cheapest is purchased first, and gas-fired electricity comes last. But the regulator charges every consumer the price of that most expensive gas-generated electricity, even though less than a third of UK power comes from gas most of the time. The rest comes from renewable energy and nuclear at guaranteed, lower prices. You're paying gas prices for wind and solar power — and that is a rip-off.

This system is based on a flawed microeconomic theory that assumes all electricity producers are identical and that the marginal — most expensive — supplier should set the price for everyone. But there is no competitive market in electricity. The electricity system doesn't resemble the assumptions of the model it's priced on. The whole thing is rigged in favour of energy companies, and it is driving the cost of living crisis for households and businesses across the country.

The fix is straightforward: charge consumers the average cost of generating electricity, not the maximum. That single change could cut energy bills by 20 to 25 percent — with no net cost to the government. Yet no politician will act, because 45 years of neoliberal thinking have convinced them that markets must set the price, even when no real market exists.

Meanwhile, public trust in the energy system is falling. Trust in the green transition is falling. And UK electricity costs continue to punish households while energy companies profit from a pricing model that serves no one but them.

If you want to understand why your energy bills are so high and what could actually be done about it, this is the video. Like, subscribe, and share it with anyone struggling with their electricity bill.

00:00 — UK electricity price crisis and why it will worsen
01:00 — Why UK electricity is the most expensive in Europe
02:00 — How electricity is generated: multiple energy sources explained
03:00 — How the market buys power and why gas sets the price
04:00 — The flawed pricing system: paying the highest cost
05:00 — Why this system ignores cheaper renewable energy
06:00 — The myth of competition and failed market assumptions
07:00 — The alternative: average pricing and lower bills
07:40 — Conclusion: policy failure and the need for urgent reform

TRANSCRIPT
A transcript for this video is available at: https://www.taxresearch.org.uk