As costs rise for energy companies during the next two years and they pass these on to the consumer, energy bills could become "frightening" according to Alistair Buchanan, chief executive officer of Ofgem.
The head of the industry regulator told MPs yesterday that consumers who are expecting to see their energy bills fall in the long term had false hopes, as gas and electricity providers
face paying higher deposits to wholesale providers which fear that, in the current economic climate, retail distributors will not be able to honour their future commitments.
Britain faces a fuel dilemma because it does not have sufficient storage capacity to buy and store fuel when it is cheap, which has been exacerbated by the credit crisis, putting stop to plans which could improve this problem.
The retail companies are also being charged more by the banks to borrow money and are "having to decide how much of this should be pushed through to consumers." he told the business and enterprise select committee on energy, adding that "this is very, very, frightening."
Meanwhile, Mr Buchanan told the Business and Enterprise Select Committee that while fuel bills
will rise in the future, they could drop in the short term – as early as the New Year – to reflect the fall in wholesale gas prices and the plummeting price of oil, down from $140 a barrel several months ago to below $50 a barrel.
"We're putting as much pressure as we can on to the companies to announce what they plan to do." he told ministers. "We would expect those prices to come off early in the New Year."
British consumers are already battening down the hatches and preparing to weather both the cold winter and the credit crunch by refusing to put the heating on to avoid high energy bills.
A quarter of consumers said that they would turn the heating on less often, the study found, while more than 750,000 households will not put it on at all, as they battle to combat the 40 per cent rise in energy bills this year, according to research from moneysupermarket.com.
Others will take less drastic measures, such as turning down their thermostat, turning off or unplugging electrical items at night, or putting on another jumper instead of reaching for the heating.
"We've seen unprecedented hikes of 47 percent for gas and 29% for electricity this year and now is the time Brits will bear the brunt of that cost as the winter weather starts to bite." said Scott Byrom, utilities manager at moneysupermarket.com. "In the current economic climate it's no surprise to see wallet-watching Brits taking decisive action to keep their energy bills down during the colder winter months."Compare gas and electricity prices
and switch energy provider
to start saving.
© Fair Investment