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 585.

    Electricity, Gas and Water, all essentials and should be run by the state, not private companies. We pay much more for Gas because we have no storage facilities in the UK that's why it's sold to Europe and we have to buy back at an inflated price, how stupid is that. Water should be in abundance in a saturated UK and Electricity. Turn up the power stations which are not working to full capacity.

  • rate this

    Comment number 584.

    None of the energy companies are British owned, Why? This means that all our energy is dependent on what somebody says in the boardroom in another country,those people couldnt care less about what we say as long as they are making big profits,and it was our government ,in the past, that sold what were ours, for short term gain. All our essential services should be British owned and run.

  • rate this

    Comment number 583.

    A nuclear station takes 15-20 years to build and commision. Fracking infrastructure will probably 10 to 20. A wind farm takes 2 months. Solar panels take 2 days. The problem is in three years.

    I don't think we have any choice in what we have to invest in... Renewables and demand managment - it's mathematics!

  • rate this

    Comment number 582.

    Is this all Ofgems job is? Every now and then they pop up to "warn" us about impending prices rises, do they actually do anything else?

    Nothing is going to change until we change it, one way or the other.

  • rate this

    Comment number 581.

    As I write, contribution from wind farms to UK electricity demand is approaching ZERO (currently 27MW - when it falls to 22MW it will be below 0.05%)..
    Official government policy - develop 'renewables'...
    Got your standby generators ready, folks..?

  • rate this

    Comment number 580.

    350. JasonEssex The Severn Barrage would stop working within a few years, as they found in Canada with a similar project. It's because of 'live' silt, which clogs it up & cannot be cleaned. It would be a waste of money and destroy the eco system of the whole Severn Estuary for nothing. All these 'green' ideas are pointless & just a diversion to keep us happy while they twiddle their doing nothing!

  • rate this

    Comment number 579.

    @412. Mummy Penguin
    What choice? They operate as a cartel so no real choice. But the point is fair. What we really want is the lowest possible price.
    Cost of energy+ cost of running company + PROFIT is NEVER EVER EVER less than cost of energy+cost of running company.
    If the company is very inefficient then it employs too many but that reduces unemployment so reduces our taxes.

  • rate this

    Comment number 578.

    It's such a shame that the media have destroyed the reputation of nuclear fission, and that so many selfish individuals around the country have been making it so difficult and expensive to build wind farms. Now we're all going to have to pay more money to keep warm.

  • rate this

    Comment number 577.

    Why are people wasting their energy by posting one would be more useful if they bombarded their MPs instead.

  • rate this

    Comment number 576.

    We knew this was coming, and the Private Sector, so much more efficient at deciding how resources should be used than the wasteful bloated public sector, somehow seems to have messed up. How can this be? My MP tell me, and he should know, that Private is always better. Perhaps it is better that we pay more for energy.

  • rate this

    Comment number 575.

    thats all fine and dandy, except we _dont_ have the technology to manage distributed embedded generation. at present the cost of resetting the protection is bourne by the network operator - this rigs the market in favout of micro generators. the real situation is, you can have your £20k windmill in your back garden, but also have to pay the £ million to upgrade the local sub

  • rate this

    Comment number 574.

    "There isn't a single person or people to blame. In my view it was a single event"

    What a refreshing approach from someone who at last isn't playing the blame game, but telling it like it is. We need more people like him, shame he is not in this govt - he could teach them a thing or two! Won't go down well with the Tories of course, whose reflex is to always blame some one else!

  • rate this

    Comment number 573.

    Another example of failure by Governments of all persuasions to create a system of energy generation that works for consumers of all types (domestic, industrial etc). At this very moment, EDF know they have the Government over the proverbial and are extracting the very best deals for our beloved Gallic share-holders. Priceless!

  • rate this

    Comment number 572.

    The poor and elderly suffer whilst the energy companies profit from their misfortune, Dickensian it the only way to describe it.

    Energy should be brought back under public ownership and supplied at cost.

  • rate this

    Comment number 571.

    The issue of shares is a primary reason why prices are high. What's the point in investing in an energy company if you pay for your own dividends through high consumer prices. Just do the maths. It's a total farce.

  • rate this

    Comment number 570.

    Yes, there's a very real possibility that at some point in the near future the lights will go out periodically unless there's decisive action NOW! That's the reason I've invested & am continuing to invest in my own power generation, although there's not much from the Sun I will be able to run my fridge freezer a few lights the pc & the microwave, not much but better than nothing!

  • rate this

    Comment number 569.

    The OFGEM graph on the BBC website shows quite clearly that it is "other costs" which are driving up prices. My bill shows VAT but all the "other costs" are hidden. Why? Could it be because they are costs loaded`onto our bills to cover subsidies for windfarms etc? Do not blame everything on the power companies, the government is more of an issue with their blind faith in renewable energy.

  • rate this

    Comment number 568.

    Modern coal-fired power stations are very efficient and that might be a place to start filling our energy black-hole. We have a lot of coal.

    Wait a second, can’t do that we must start to rely on energy production that stops at night or when there is no wind. We must endure high bills to subsidise inefficient energy production to appease people who believe in an unproven man-made climate change.

  • rate this

    Comment number 567.

    Prices will inevitably rise until other sources are economic to do. Effectively until wind, solar etc. are profitable without government subsidy. As that is the real cost of energy in a form we want to use, when not stealing from past million year old fossil sources on the cheap.

    It is higher prices or pedal your own generator.

  • 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??



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