Energy News

Energy bills will rocket without major reform

Wednesday, 3 February 2010

By Hazel Cottrell - hazel@consumerchoices.co.uk

UK energy bills will become unaffordable for many households, unless action is taken now, says regulator Ofgem.

Energy bills could rise by up to 25% over the next decade, according to energy regulator Ofgem (www.ofgem.org.uk).

In a new report, Ofgem also warned of power shortages. It said that there is “reasonable doubt” that current energy arrangements will deliver secure and sustainable energy supplies in the future.

This is due to the combination of the global financial crisis, tough environmental targets, increasing dependency on gas imports and the closure of ageing power stations.

The report, Project Discovery, states: “The higher cost of gas and electricity may mean that increasing numbers of consumers are not able to afford adequate levels of energy to meet their requirements.”

Alistair Buchanan, Ofgem’s chief executive, told BBC Radio Four that energy bills could rise by 14-25% by 2020.

Ofgem has put forward a number of proposals to reform the energy market. It’s most radical suggestion involves implementing a form of centralised market control.

Buchanan said: “We do not advocate change lightly, but all the facts point to the need for reforms now. Acting earlier will also help keep costs as low as possible for consumers.”

Ofgem’s proposed “central energy buyer” would determine the amount and type of new energy generation needed and enter into long-term contracts for power.

Chris Eagle, commercial manager at Energychoices.co.uk, said: “This is a bold recommendation, and could signal the biggest energy market transformation since privatisation in the 1980s.

“Ofgem is making a stand and taking its responsibilities as regulator seriously – which can only be good news for the consumer.”