What caused the 2022 energy crisis, and how did the UK government help households?
In 2022 the government paid part of every household's energy bill; with similar help for businesses, the Institute for Fiscal Studies put the cost at over £100bn a year.
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The 2022 energy crisis began in the aftermath of the COVID-19 pandemic, with shortages and higher prices in oil, gas and electricity markets. A rapid post-pandemic economic rebound outpaced energy supply, and the crisis escalated into a widespread global one. The price of natural gas reached record highs, and so did electricity in some markets, because gas frequently sets the price at which electricity is sold.
In Britain this hit suppliers first. Between July 2021 and May 2022, 29 retail energy suppliers collapsed, largely due to unprecedented increases in wholesale gas prices. The largest, Bulb Energy, with 1.7 million customers, entered a special regime underwritten by the UK government.
Then came support for households. On 3 February 2022 the Chancellor announced a £200 discount on bills, to be paid back later. On 26 May it was doubled to £400 and made a grant, paid as six monthly rebates from October 2022 to March 2023. From 1 October 2022 the Energy Price Guarantee paid suppliers a to limit typical household energy costs to £2,500 a year. Similar help went to businesses, and the estimated the whole package at over £100bn a year.
Not everyone agreed it was well designed. Several economists argued that the response relied too heavily on price subsidies, which greatly inflated the cost and weakened incentives to save energy. In October 2026, Ofgem said energy prices were 52% below the height of the 2022 crisis.
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Recap
Gas sets electricity's price, so a gas spike hit bills twice, and the UK cushioned it with a costly across-the-board subsidy.
💡 A trick to remember it · When the water main burst, the government held a giant umbrella over every house, and it was a very expensive umbrella.
Surprising fact · The Institute for Fiscal Studies estimated the 2022 support package, including help for businesses, at over £100bn a year.
Connects to
- 🚢 How does Britain buy its gas: the NBP, LNG ships and Norwegian pipelines?
- 🛑 What is the Ofgem price cap, and how is it set?
- ⚡ Why does gas set the price of electricity, even when most power is cheaper?
- 🛢️ Why is UK North Sea output falling, and who decides on new oil and gas licences?
- 🌬️ What is a windfall tax, and why do governments sometimes tax banks and energy firms?
Sources (4)
No source, no claim. Every fact in this lesson (15 claims) cites at least one of these.