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Bills to rise as Ofgem chief warns of energy squeeze

ENERGY bills are set to rise further, the head of regulator Ofgem has warned, as Britain faces a "horrendous" supply crunch.

Alistair Buchanan said the UK was facing an "uncomfortable" squeeze in energy reserves over the next three years as ageing power plants close and the country is forced to import gas at a time of tightening global supply. With coal and oil-fired power stations closing earlier than expected to meet environmental targets, around 10% of current generation stock will go by April.

Mr Buchanan said Britain would avoid black-outs but it was inevitable that prices will rise as supply struggles to keep up with demand.

"We've got to go shopping around the world for our gas," he said. "It's just horrendous serendipity that just as we have a squeeze on our power and turn to gas, the global markets have a squeeze."

He called on the Government to deliver on its Energy Bill, which is going through Parliament and is designed to encourage investment in low-carbon generation, while saying consumers will have to better manage their bills through energy efficiency.

Energy providers will also be watched closely by the regulator to ensure they do not "take advantage" of the situation to try to raise prices by more than necessary, said Mr Buchanan.

Since the end of 2010 Scottish Power has increased gas prices by 22% and electricity by 25%. The hikes are typical across the industry.

The Scottish Government has prioritised the expansion of wind power, with the aim of Scotland generating the equivalent of its total energy needs from renewable sources by 2020.

A raft of Britain's coal fired power stations are closing over the next few years but new plants have yet to be built.

Longer-term solutions such as nuclear power stations and tapping into domestic gas shale reserves – exploited by "fracking" – are waiting for the final go-ahead from the Government.

Ofgem claimed it had been warning the Government of the impending supply crisis since 2009, but said the financial crisis set back plans to get alternative power sources up and running.

A spokesman for the Department of Energy and Climate Change said: "Our energy system faces significant challenges over coming years, including the closure of around one-fifth of our ageing power stations, so we cannot afford to be complacent.

"The reforms we are making to the electricity market through the Energy Bill and through our gas generation strategy are aimed at plugging this gap in order to keep the lights on."

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