Energy crisis may add £500 on to family bills, warns Ofgem

Without "unprecedented" levels of investment of up to £200 billion there is "reasonable doubt" about whether the lights can stay on in the next decade, says energy regulator Ofgem.

The Project Discovery study concluded that without urgent action Britain's energy infrastructure will be overwhelmed by the impact of the financial crisis, tough new environmental targets, dwindling domestic gas reserves and the mass closure of ageing nuclear plants and polluting coal-fired power stations by 2020.

Experts warned the report painted a grim scenario that would make the recession "pale by comparison."

It is by far the most outspoken warning from Ofgem's chief executive Alistair Buchanan, who told the Government that leaving the privatised system for supplying gas and electricity "is not an option."

He said: "Our evidence shows that Britain has a window of opportunity to put in place far-reaching reforms to meet the potential security of supply challenges we may face beyond the middle of this decade. " The report says that the key decisions on investment need to be taken by 2013.

It suggests five policy packages to address the problem but admits they all involve higher bills for consumers largely because of "the level of investment required."

One commentator said average bills may have to rise to £2,000 per household. Mark Todd, director of independent price comparison website energyhelpline, said: "This is a bombshell announcement. The price of fuel has already trebled since privatisation and Ofgem is making it clear that we are all going to have to pay a lot more to guarantee supplies in the future."

In a worst case scenario bills could rise by more than half by 2016, adding more than £500 to a typical family bill in today's prices.

Energy minister Ed Miliband said: "The Government is confident that Britain will meet its security of supply needs in the years ahead. However, for the longer term... the scale and upfront nature of the low carbon investment needed is likely to require significant reform."

Hot tips

Heat the room you use the most — turn heating down in others
Close internal doors to stop heat escaping
Close curtains after dusk. If they're over a radiator, tuck them behind to keep warmth in
Pull furniture away from radiators so warm air can circulate
Don't keep electrical equipment on standby
Only put full loads in the washing machine and dry washing outside
Keep lids on saucepans
Cook in big batches
Don't overfill your kettle