British Gas cuts prices but power shortages loom

There is good news for consumers today as British Gas has announced that the average gas bill will be cut by seven per cent. In what is the third price cut in the past year, the company says that the latest reduction, which reflects falls in wholesale prices, will save customers in the region of £55 a year on average.

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However, it seems every silver lining has a cloud as energy regulator Ofgem warned that the relief for British householders could be short lived. Ofgem says that power shortages are looming and, in as little as five years' time, consumers could find themselves struggling to cope with the rise in energy prices. According to independent experts, UK households could see their annual fuel bills rise from the current level of £1,230 to a daunting £5,000 by 2020.

Ofgem insists that there has been a distinct lack of preparation for the closure of coal and nuclear power stations across the country, with many due to fall dormant within the next 5 to 10 years. And the regulator claims that almost £200 billion is needed to build new "clean" coalfired plants, nuclear stations and green projects. But Britain cannot, it says, rely on the private sector to complete all of these projects - and that means relying on pricey imports from Russia and the Middle East.

So what is to be done?

Ofgem has drawn up a plan called Project Discovery, which suggests two options: the introduction of a nationalised energy-buying body that would commission power companies to build the necessary plants, guaranteeing a high price and thereby a profit; or the Government to nationalise the green energy sector and the consumer to pay the price of its expensive power.

Either way, it seems the consumer will be facing higher prices in the very near future.

But would you prefer to pay the price for a nationalised green energy source, or continue to fill the coffers of the energy suppliers?