Consumers to pay high price for UK’s reliance on imported gas

By Katie Anderson on February 21, 2013

Ofgem has warned that energy bills in the UK are expected to increase every year for the foreseeable future. The energy regulator made its prediction after the Committee on Climate Change (CCC) warned ministers that the country would be weakened by higher gas prices.

In an article published by the Daily Telegraph, Alistair Buchanan, the Chief Executive of Ofgem, wrote: “We have to face the likelihood that avoiding power shortages will also carry a price.

“If you can imagine a ride on a roller-coaster at a fairground, then this winter we are at the top of the circuit and we head downhill, fast. Within three years we will see reserve margin of generation fall from around 14 per cent to below 5 per cent. That is uncomfortably tight”.

Although careful in his choice of words, Mr Buchanan made his point clear: energy prices are going to keep rising so long as supply falls and demand increases.

Mr Buchanan’s comments refer in part to an apparent distortion in the UK gas market, whereby consumers end up paying more for imported gas than energy companies receive for exporting British gas abroad. Between December 2011 and October 2012, Britain exported 15 times as much gas as it imported.

On Tuesday, Mr Buchanan wrote: “Just when we need more gas, world demand for gas is set to tighten”.

The position of Ofgem has enraged campaigners for a more balanced energy market in the UK. The Executive Director of Which?, Richard Lloyd, argued that the regulator ought to be encouraging more competition among the so-called Big Six energy suppliers in Britain.

As quoted by the Guardian, Mr Lloyd said: “Consumers will be alarmed at Ofgem’s prediction that they will pay an even higher price for our increasing reliance on imported gas.

“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”.

Mr Lloyd added that Which? wants the government to do more to “help people improve their home energy efficiency”. Installing a new central heating boiler, loft insulation, cavity wall insulation and double glazing can cut annual energy bills by several hundred pounds.

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