Get ready for big energy bill hikes

9 October 2009

Energy bills could spike by as much as 60% over the next decade putting additional financial strain on households, the energy regulator Ofgem has warned in a new report.

Investment of up to £200 billion is needed in energy infrastructure and green measures over the next 10 years – forcing energy companies to increase domestic energy bills.

Ultimately, Ofgem says bills will be between 14% and 25% higher by 2020 but it warns of a 60% spike in prices in the interim period.

The prediction is based on four scenarios of how energy companies can face the “challenges” of a volatile global gas market and the end of power stations. Companies will also need to invest more money in green measures, such as wind farms.

However, Ofgem says that in each scenario energy bills will rise.

Alistair Buchanan, chief executive of Ofgem, says: “Consumers are already enduring high energy prices. This is why we are consulting with consumer and environmental groups, the academic community and industry to ensure any policy proposals we make are grounded on the best evidence available. Early action can avoid hasty and expensive measures later.”

The average annual energy bill is currently £1,239, according to This means that, in the regulator’s worst case scenario, bills would rise to just under £2,000 a year in 2016.

There are concerns that the rise in energy bills could be even higher, as Ofgem’s forecast only doesn’t take into account all the cost pressures facing suppliers. says there is a risk that the cost of energy could rise to nearly £5,000 a year by 2020 – nearly four times higher than prices today.

Ann Robinson, director of consumer policy at, says: “If bills rise by the amount that Ofgem suggests we will all have got off lightly. The £5,000-a-year energy bill may seem like an outside possibility, but we have to remember that energy bills doubled in the last five years alone."

She adds: "Huge investment needed just to keep the lights on in Britain will alone add £548 a year onto our bills. The fact is we are entering a new era of high cost energy and households will have to adapt their behaviour accordingly.”

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