HOUSEHOLD gas and electricity bills could reach £2,000 without drastic action to shore up the UK’s energy supply, regulator Ofgem warned.
The watchdog said the country could have to spend as much as £200bn to secure supply and meet environmental targets as it faces a massive drop in output from ageing power stations.
Ofgem’s review of Britain’s energy market says household bills will rise between 14% and 25% from 2009 levels by 2020 in four scenarios which weigh up the impact of different levels of investment on infrastructure and the pace of global recovery from recession.
In its worst-case scenario – that of a strong resurgence in global economies along with missed renewable and carbon targets – the watchdog said consumer bills could peak at more than 60% higher by 2016 before falling back.
A spokesman for the energy industry supported the review findings and said Ofgem was “absolutely right” to call for investment in the sector.
David Porter, chief executive of the Association of Electricity Producers, warned it was not possible to deliver changes “on the cheap” and added: “In the end, the customer does pay.”
He said: “What we need to do is make sure that the political and regulatory framework that we operate in enables companies to make the right economic decisions and then customers will have the least possible price increases.”
The average household pays £804 a year on gas and £443 a year on electricity – a total of £1,247. This could peak at £1,995 a year if the gloomiest prediction proved accurate.
The cheapest of Ofgem’s scenarios – involving a slow economic recovery coupled with global green stimulus packages – would see annual bills hitting £1,421 by 2020.
Average annual household energy bills have almost doubled since 2003 as wholesale prices soared.
Ofgem said rates of investment would have to more than double to meet likely demand – while “significant” changes may be needed in the way we consume and generate power due to increased reliance on wind power.