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UK Domestic Energy Bills to Rise Despite Increased Profits for the Leading Energy Companies

By David Holmes on October 14, 2009

Gas & Electricity Prices Set to RiseIt was reported recently Ofgem, which is responsible for the regulation of electricity and gas markets across Great Britain, feared UK domestic energy bills would rise despite increased profits for the leading energy companies.

Although Ofgem clarified that it was powerless to interfere with the prices set by energy companies such as E.ON and British Gas, it advised that savings from lower wholesale fuel costs were not being passed on to consumers and the major energy companies were contemplating further price rises. Following a detailed study by Ofgem, four probable scenarios have been identified in respect to the future of domestic energy and, unfortunately for consumers, all involve a hefty rise in prices.

The first two scenarios outlined by Ofgem refer to the drive for renewable forms of energy. Ofgem has proposed that the various green energy initiatives will take their toll on domestic energy companies and, in turn, its consumers. Under the Green Transition scenario, Ofgem argues rapid economic recovery and expansion in green renewable energy measures will lead to a decreased demand for gas but a significantly higher demand for electricity. Domestic energy bills will rise 23% by 2020 under the Green Transition model. According to the Green Stimulus scenario, consumer bills will rise by 14% in the same period as a result of slower economic recovery and green investment.

Another rise of 22% is predicted if the Slow Growth model takes effect, with the economy proving lethargic in shaking off the recession. However, the main threat to consumer bills appears to be that of a Dash for Energy scenario, which will see domestic bills rise by a massive 60% during the same period. Under the Dash for Energy model, Ofgem predicts international security concerns will take precedence over environmental targets, which will ultimately result in increased competition between nations for limited fuel supplies.