Families face 66 per cent rise in gas bills - to more than £1,000 a year

An increase on such a scale, which could happen within two years, would have devastating consequences for ordinary people and the wider economy.

The report warns the average household gas bill could go up £400 a year at the same time as the cost of food and petrol is rising faster than wages

The alarm was sounded by analysts Eclipse Energy in a study commissioned by the power giant Centrica, parent company of British Gas. It blames the fact that the price of gas is tied to oil, which has spiralled to more than 140 dollars a barrel.

It says this link will take household energy bills to levels that will force millions to choose between heating and eating.

But consumer groups argue that there is no good market reason for the link, other than ensuring multi-billion windfalls for companies such as B.P., Texaco and Shell, as well as countries like Russia.

Energywatch, which represents the interests of consumers, has described the link as 'toxic' and says that if the price of gas was decided by supply and demand, it would be more than a third lower.

There will also be suspicions that the power industry has released the Eclipse report as part of a campaign to justify a new round of price rises which is due to be announced within weeks.

Centrica chief executive Sam Laidlaw said the research proved that the rises are outside the control of companies such as British Gas.

Jake Ulrich, the company's managing director, said people would have to change their behaviour radically to protect themselves against rising bills.

'People will change the temperature they keep the house,' he said. 'Maybe it will be a case of two jumpers instead of one.

'They will be more cognisant of energy waste and will buy better appliances.'

The warning of massive price increases comes when families are facing the biggest squeeze on living standards since the 1970s. Energy costs have been a key factor behind recent big increases in the cost of food production and transport.

The Eclipse study says that as North Sea gas runs down, the UK will become increasingly reliant on imports. These will come via pipeline from Europe and through shipments of liquefied natural gas.

British power suppliers will have to pay top prices for LNG to ensure they get shipments which might otherwise go to Asia and the U.S.

The Eclipse Energy report warns: 'Domestic users have to adjust to higher gas prices and prepare for a future where energy costs will account for a more significant proportion of the household budget.'

An estimated 4.5million households are currently in fuel poverty  -  spending more than 10 per cent of their disposable income on heat and light. This figure seems set to soar.

The report says: 'The Government will have to take appropriate steps to alleviate fuel poverty and manage the social and economic impact of demand destruction'.

Eclipse warns that if the price of oil keeps rising, the increase in gas bills may be even higher than it predicts.

Dr Paul Golby, UK chief executive of German-owned E.on, said that while he has sympathy for customers, the country faced a future of higher energy prices.

But Allan Asher, the chief executive of Energywatch, said Gordon Brown should be leading a campaign in the EU to break the price link between oil and gas.

He said the watchdog has received some advice from lawyers that the link could even be illegal under EU treaties.

Mr Asher said: 'The Government should be leading an international drive to unravel the artificial and toxic link between the price of gas and the price of a barrel of oil.

'The link to oil means that wholesale gas is selling for five times the Government's estimate of its production costs. High energy prices are already undermining UK plc and increases on the predicted scale will cause untold damage for individual consumers and the wider economy.

'Rampaging oil prices are a serious and global contagion.

'That does not mean we should just take to our beds and hope that the fever will pass. Government can and should act in those areas where it can have an effect.

'Action to cut to the price link between gas and oil, action to improve the working of the domestic market, action to help those who can least afford to keep warm.'