Ofgem predicts 2015 energy crunch

Even higher energy costs? Alastair Buchanan, the boss of Ofgem, the UK energy regulator, is warning British consumers face a sharp hike in their gas and electricity bills by the middle of the decade.

The reason given for the predicted hike is the closing of many British coal-fired power stations. How exposed will you be?


Cold front

It depends on several reasons: how advanced Britain's nuclear power capability will be (the first new station has been delayed two years, set back to 2019) by that time. One of the UK's biggest energy problem is about capacity and our increasing reliance on gas (previously it was thought UK gas consumption was likely to fall) supplies.

In truth, some in government will welcome (though privately) the rise in energy prices. That's because the government is desperate to meet its own carbon targets. When you make something expensive (like the petrol you put in your car) you're likely to use less of it.
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There's other issues. One is that more than half of the UK's utility services are now foreign-owned. When prices rise, foreign owners are at some remove from public anger, making it harder to exert direct pressure.

The British consumer is also clobbered by confusing tariffs. Between the big six energy suppliers, there are well over 100 price plans to choose from.

Wrong tariff

Recently Nick Clegg said energy companies will be forced to write to customers every year tell them what the cheapest deal for them is likely to be.

"We have secured a landmark deal with the six big energy companies who cover 99% of customers, to give customers a guaranteed offer of the best tariff for them. Right now, seven out of 10 customers are on the wrong tariff for their needs, so are paying too much."

Companies are also being encouraged to print barcodes on bills, allowing you to scan code into your mobile phones, linked them to the cheapest energy tariffs. Given Buchanan's predictions for 2015, these moves are needed.

But what is still needed is greater clarity from the energy companies on their charging model so consumers know they are being treated fairly. If you look at the graph below, the only utility that hasn't seen a sharp rise in prices since 2005 is water.

The changing cost of utilities in the UK (source: Castle Cover)



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