All about energy

1:59pm UK, Wednesday February 03, 2010

Ed Merrison, Sky News Online

British consumers could face unaffordable bills if radical plans are not put in place to safeguard power supplies, the energy watchdog has warned.

Ofgem wants the Government to take greater control to ensure future supply

Ofgem, which has warned bills could soar by as much as 25% over the next decade, said the UK risks running short of gas and electricity by 2015.

In a wide-ranging report, it said doubt over the security and sustainability of the country’s energy supplies meant sticking with current policy was “no longer an option”.

The regulator put forward a range of suggestions to help release the estimated £200bn Britain may need to invest by 2020 in order to ensure future supply.

The most far-reaching of its plans would be to create a central energy buyer that would set the amount and type of new power generation needed.

Bills threaten to become unaffordable

Ofgem said the depth and urgency of UK’s energy problems stemmed from a perfect storm of financial crisis, environmental targets, dependency on imported gas and the closure of ageing power stations.

It outlined the challenges to Britain’s energy markets in October, when it warned that average household gas and electricity bills could reach nearly £2,000 a year without drastic action.

Its latest document, which follows a consultation period, warns the country may only have relative power security until 2015 and that an increasing number of consumers would not be able to afford enough energy.

Energy and Climate Change Secretary Ed Miliband said the Government was “confident” of meeting energy supply needs in the years ahead but agreed that a “more interventionist energy policy” was needed in the longer term.

“The scale and upfront nature of the low-carbon investment needed is likely to require significant reform of our market arrangements to deliver security of supply in the most affordable way,” he added.

The CBI business group welcomed the report, saying it gave a “stark warning” that existing policy would not provide the energy mix needed to provide power security, cut carbon emissions and maintain competitive prices.

But CBI deputy director-general John Cridland warned that, with massive private-sector investment needed to solve problems, the market place needed to remain attractive to investors.

“Future policy must take into account the benefits of a competitive market and also the need to give some certainty to investors who will be required to pay for new energy sources,” he said.