Energy bill rises on the horizon

Rebecca Atkinson
09.10.09 10:21

Consumers are likely to end up footing the bill for �200 billion of investment to secure energy supplies and meet environmental targets over the next 10 years.

Energy bills could rise by as much as 60% over the next decade as energy companies pass the multi-billion pound costs of the investment in energy infrastructure and green measures onto households, regulator Ofgem has warned in a new report.

Ultimately, Ofgem says bills will be between 14% and 25% higher by 2020, but it warns of a 60% spike in prices in the interim period.

The prediction is based on four scenarios of how energy companies can face the 'challenges' of a volatile global gas market and the end of power stations. Companies will also need to invest more money in green measures, such as wind farms.

However, Ofgem says that in each scenario energy bills will rise.

The biggest challenges to the country's energy supply come from its increasing exposure to and reliance on volatile global gas markets and ageing power stations which are coming to the end of the lives.

The regulator also said "significant changes" may have to be made in the way we consume and generate power to manage the "variability associated with increasing reliance on wind power".

Alistair Buchanan, chief executive of Ofgem, says: "Consumers are already enduring high energy prices. This is why we are consulting with consumer and environmental groups, the academic community and industry to ensure any policy proposals we make are grounded on the best evidence available. Early action can avoid hasty and expensive measures later."

The average annual energy bill is currently �1,239, according to uSwitch.com. This means that, in the regulator's worst case scenario, bills would rise to just under �2,000 a year in 2016.

There are concerns that the rise in energy bills could be even higher, as Ofgem�s forecast only doesn�t take into account all the cost pressures facing suppliers. uSwitch.com says there is a risk that the cost of energy could rise to nearly �5,000 a year by 2020 � nearly four times higher than prices today.

Ann Robinson, director of consumer policy at uSwitch.com, says: "If bills rise by the amount that Ofgem suggests we will all have got off lightly. The �5,000-a-year energy bill may seem like an outside possibility, but we have to remember that energy bills doubled in the last five years alone and that the huge investment needed just to keep the lights on in Britain will alone add �548 a year onto our bills.

"The fact is we are entering a new era of high cost energy and households will have to adapt their behaviour accordingly."

Energy bill rises on the horizon

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