Supply crunch 'will lead to higher energy bills'
HOUSEHOLDS have been braced for yet more energy bill hikes after regulator Ofgem warned Britain was heading for a "horrendous" supply crunch.
Alistair Buchanan, its outgoing chief executive, said the UK was facing an "uncomfortable" squeeze in energy reserves over the next three years as ageing power plants close and the country is forced to import gas at a time of tightening global supply.
With coal and oil-fired power stations closing earlier than expected to meet environmental targets, around 10% of current generation stock will go by April. And within three years, the reserve margin of generation will fall from around 15% to below 5%.
Mr Buchanan, who steps down in June after 10 years in the post, said it was inevitable that prices would rise as supply struggles to keep up with demand.
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"We've got to go shopping around the world for our gas," he said.
"It's just horrendous serendipity that just as we have a squeeze on our power and turn to gas, the global markets have a squeeze," he added.
Ahead of a speech, he called on the Government to deliver on its energy bill, which is going through Parliament and is designed to encourage investment in low-carbon generation, while saying consumers will have to better manage their bills through energy efficiency.
Energy providers will also be watched closely by the regulator to ensure they do not "take advantage" of the situation to try to raise prices by more than necessary, said Mr Buchanan.
Which? executive director Richard Lloyd said consumers would be "alarmed" at Ofgem's price warnings.
He said: "After another winter of inflation-busting price hikes, the rising cost of energy is already one of the top financial concerns for hard-pressed households.
"The Government should ensure consumers are properly protected from unaffordable misery generated by today's broken energy market, and give people confidence that they are not writing the energy industry a blank cheque for years to come."
A raft of Britain's coal fired power stations are closing over the next few years, with the Kingsnorth site in Kent closing by the end of March.
But new plants have yet to be even built, while longer-term solutions such as nuclear power stations and tapping into domestic gas share reserves are waiting for the final go ahead from the Government and are unlikely before 2020, meaning that the UK will have to import gas from abroad.
It is expected that gas will account for around 60% of our power station needs instead of 30% today.
Mr Buchanan said while the UK should avoid black-outs or so-called brown-outs, the harsh reality facing many consumers and businesses was that bills would keep on rising.
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