Energy watchdog Ofgem chief warns of bill rises


Ofgem chief executive Alistair Buchanan is questioned over the rises

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Consumers are being warned they face higher energy bills as the UK becomes more reliant on energy imports.

The warning comes from Ofgem chief executive Alistair Buchanan, who says falls in the UK's power production capacity are likely to lead to more energy imports and price rises.

The energy watchdog predicts power station closures could mean a 10% fall in capacity by April alone.

Mr Buchanan has said the UK needs more gas supplies to fill the shortfall.

His warning comes as older power stations close and renewable energy is still growing.

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Existing plans to take ageing and polluting power stations off the UK network over the next few years mean the amount of energy the UK can produce is set to fall.

Start Quote

There isn't a single person or people to blame. In my view it was a single event - the financial crisis”

End Quote Alistair Buchanan Chief Executive, Ofgem

The BBC's John Moylan says that, while we have heard such warnings before, the difference with this one is that the process is already underway. Plants are already closing, and although planning permission for new ones is out there, nothing is actually being built.

While the shortfall in supply can be filled by increasing gas imports, competing for those supplies on the global market is likely to cost more.

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.

Breakdown of predicted energy suppliers

Mr Buchanan told the BBC that Britain "would be very tight on power station capacity in three to five years' time".

"We're going to have to go shopping in world markets at a time when they will be very tight [on supplies] themselves."

"There isn't a single person or people to blame. In my view it was a single event - the financial crisis. Before the financial crisis the government had backed a visionary approach to energy on wind, water and nuclear... then came the financial tsunami."

He said that crisis had a major impact on the government's ability to pay for such expensive schemes.

Plugging the gap

Mr Buchanan added that it was very important to resolve "leaky homes" and become more energy efficient in order to avoid the approaching "near crisis".

He is stepping down as Ofgem chief executive later this year.

A spokesman for the Department of Energy and Climate Change said that "we cannot afford to be complacent".

"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," he added.

Analysts said there was little chance of the UK running out of gas.

"We must not fear," said Ashton Berkhauer, the deputy chair of Energy Forecaster, which gives companies advice on their energy bills.

"The UK is very well connected. We have a number of different inter-connectors based all around the country as well as huge import facilities."

However, he added that both consumers and businesses "need to make sure they are not using more than they need to".

The chief executive of Consumer Focus, Mike O'Conner, warned that it would be those who can least afford it who would suffer the most.

"With six million households in fuel poverty, rising to over nine million by 2016, and an increasing proportion of our incomes being spent on essential items like energy, this latest news... is chilling."

Caroline Flint, Labour's shadow energy and climate change secretary, said it was important for the UK to have an energy market that "delivers fair prices and works in the public interest".

She said Labour had plans to create "a tough new energy regulator with the power to force energy companies to pass on savings to consumers".

"We must also prioritise making Britain's homes better insulated and more energy-efficient," she added.

Graph showing electricity bill and wholesale and other costs

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  • rate this

    Comment number 813.

    Price rises will happen it is government policy to make us all pay more for the essentials. Basically it all stems from the fact our leaders could not get their act together to get a coherent energy policy. They need to invest in power plants that use the sources of energy we have in the UK. Not continue to invest in power plans that use imported energy like gas

  • rate this

    Comment number 711.

    Such a shame that consecutive governments have neglected to invest in important, tangible infrastructure - railways, communication networks, schools, hospitals, energy and most public services that we all need and use. The emphasis and bedazzledment on/of commerce and financial institutions (producing nothing except hefty profits for the brokers and bankers), has led this country into decline.

  • rate this

    Comment number 650.

    My husband and I (both pensioners) already this winter have gone to bed at 9.00pm to cut down on our fuel bills. Before long we won't be able to get out of bed at all - thank you Mrs T for privatising it and thank you to the Utility companies for wanting more and more profits for your shareholders. So glad we are a civilised country!!!!!!

  • rate this

    Comment number 566.

    I would really like one (or all) of the main energy companies to explain WHY it is that they make records multi-billion pound profits year after year when they keep telling us that they have to put prices up to 'cover their growing costs'?? If this were the case surely their profits would be decreasing??


  • rate this

    Comment number 412.

    Am I alone in not wanting choice? A single supplier for "essential" services means in theory we should all be paying one price and getting the same service. That seems fair to me if those who truly need it get support. I (and others) survived the 3 day week when energy supply was limited. Perhaps the time has come to force us to limit our use the planet's resources.


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