Energy Bills Will Rise, Warns Ofgem Chief: Over Reliance On Gas, Inflation And Power Station Closures To Blame

The energy watchdog Ofgem has admitted there is little that can be done to prevent another round of price rises, as closing power stations, inflation and the UK's over reliance on gas cause a pricing perfect storm.

Ofgem chief executive Alistair Buchanan will issue a speech later on Tuesday which will say that falls in Britain's power production capacity are likely to lead to more energy imports and customers paying more.

The coal and oil-fired power station closures, which are already earmarked to help the UK hit its environmental targets, will result in a 10% capacity reduction alone, according to Buchanan.

He wrote in the Telegraph that the energy sector would endure a period like a "ride on a rollercoaster at a fairground" in the coming months, adding: "We have to face the likelihood that avoiding power shortages will also carry a price."

The issue is further frustrated by the fact that longer term solutions to the UK's energy needs, such as new nuclear power stations or tapping domestic shale gas reserves, have yet to be given the final go-ahead by the government.

Growing demands from Asia - particularly China - are also causing worldwide shortages. The UK is also being hit by a double whammy, as inflation remains stubbornly high and is due to rise further - leading to a rise in the price of energy imported from overseas.

A spokesman for the department of energy and climate change told Press Association the government would not be "complacent" about the looming energy gap.

"The reforms we are making to the electricity market through the Energy Bill and through our gas generation strategy are aimed at plugging this gap in order to keep the lights on," a spokesman said.

"We have legislated to introduce a capacity market that will help guard against blackouts and ensure there is sufficient supply when margins get tight. We are opening up the electricity market to incentivise a record £110 billion of private sector investment in new clean power generation - in renewables, new gas, nuclear and carbon capture and storage.

"We can't put all our eggs in one basket, we need a diverse energy mix. This is the best solution to guard against high price of wholesale gas which drives up consumer bills."

Graeme Leach, chief economist of the Institute of Directors, told the Telegraph: "It is a cause for great concern that without meaningful action our energy supply may become unreliable, unaffordable or both...we need to get moving on the fundraising, infrastructure and regulatory requirements to make them happen sooner rather than later."

And Ann Robinson from warned consumers can’t take too many price rises, adding the average household energy bills have already risen 159% since 2004.

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