Increase in Energy Bill Rates Likely

It has been revealed by an energy regulator, that utilities in UK homes, such as energy bills could increase by 60% by 2016.

The group however stated that this figure was the worst possible reality, and the most common statistic outlined in their Ofgem report, displayed prices to jump between a meeker 14% and 25% above inflation by 2020.

The regulator noted that unstable gas markets and power stations nearing the end of their use were the main concerns.

The review also pointed out that up to £200bn of investment was needed to secure supplies and to meet carbon targets.

The report which highlights four possible cases for energy use and security in the next 10 to 15 years, was launched by the Project Discovery scheme, which produced Ofgem.

The four core issues focused on were 1 - Green transition: Rapid economic recovery and significant expansion in green measures lower gas demand, but increase electricity demand for electric vehicles and heat pumps. Therefore, domestic energy bills could jump by 23% by 2020.

2 - Slow growth: Nuclear and renewable power plants were built due to the credit crunch causing low investments in gas and electricity infrastructure. Thus, consumer bills could rise by 22% by 2020.

3 - Dash for energy: Whilst finance can revive, there are worries over security issues. Environmental targets are missed and no new nuclear plant is operational before 2020. As a result competition between countries for energy resources results in restricting gas supplies and high fuel prices. Hence, domestic energy bills could bump up by 60% by 2016.

4 - Lastly, the scheme looks at Green stimulus: Due to the recession, the government encourages targets specifying green goals. Consumer energy bills could increase by 14% by 2020.

Ofgem figures show that the average annual household gas bill hiked by 120% from September 2000 (£365) to September 2009 (£804). Over the same period, the average yearly household electricity bill shot up by 48% from £299 to £443.

Therefore, the report urged the need for investment in unstable world energy prices and pointed out the UK's increasing dependence on gas imports.

Concern for the future

Ofgem chief executive, Alistair Buchanan, said these were worrying times: "These are big challenges. 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," he said.

Garry Felgate, chief executive of the Energy Retail Association, said: "Energy suppliers face the challenge of meeting our future energy needs and reducing carbon emissions, all at an affordable cost to customers.

"Once again, Ofgem's report highlights how difficult these needs are to balance, at a time when bills already include the costs of energy efficiency schemes, renewable energy obligations and transmission and distribution charges."

A consumer group called for more urgent action from the government. The organisation's energy campaigner Dr Fiona Cochrane, praised Ofgem for researching into the problem, but urged the government to take heed :

"The way consecutive governments have passed the buck on this issue is tantamount to negligence. By ignoring security of supply for so long, they've saddled consumers with what could be a colossal bill," she commented.

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