Energy bills to rise: or power shortages by 2015

PylonsAndrew Milligan/PA Wire

Ofgem has issued an alarming report, that reveals the UK will face power shortages by 2015 unless there is a radical transformation in infrastructure. The changes would mean major investment, and guess who is going to pay?

So what does the report mean for you?

Power cuts

Energy regulator, Ofgem, warned that based on the current infrastructure, we're going to run into power shortages as the weather turns colder at the end of 2015. At the moment we have 14% spare capacity - but that's set to fall to 4%.

The problem is the coal fired power stations. They were always going to have to close eventually, but they are now going to close sooner than expected because of the rigours of EU environmental legislation.

If nothing is done to boost infrastructure investment, we're going to have power shortages. We will also become increasingly dependent on imported gas - which will mean energy prices are likely to go up.

Rising bills

The question, therefore, becomes how to afford the infrastructure, to ensure this doesn't happen. "The unprecedented challenges in facing Britain's energy industry... to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain," said Ofgem chief executive Alistair Buchanan. The cost is estimated to come in at somewhere near £150 billion.

And while we can hold out the hope for external investors, the fact is that the energy companies are going to have to dig deep. This isn't something they particularly enjoy - so we can expect the costs to be passed onto the consumer.

The report said: "Given the levels of investment needed, there is a high likelihood of rising consumer bills, especially if oil and gas prices continue their underlying rise since 2003."

Buchanan says we will get something in return for this massive outlay. He explains: "Ofgem is also seeking sweeping reforms to the retail market to ensure a simpler, clearer and fairer energy market for consumers. This is vital as if consumers are going to be expected to pay for this investment, it is only right that they see a complete change in the way suppliers treat them. Encouragingly we are increasingly seeing evidence that suppliers have got the message and we will be publishing our next reforms proposals shortly."

Mark Todd, Director of price comparison service is unimpressed. He says: "Despite our predictions that 2013 will bring record-breaking energy bills, consumers consistently bear the brunt of investment costs whilst the main suppliers reap the benefits of restricted competition and high profits. It is time for the Government to take a stand and fight the consumers' corner. We eagerly await Ofgem's proposals, but in the meantime call for customers to take control and switch suppliers when they are not getting the most for their money."
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