Family power bills 'to soar 50% in four years

By David Derbyshire for MailOnline
Updated: 07:08 EDT, 14 May 2011

Cash-strapped families face a stinging 50% rise in their gas and electricity bills in the next four years, analysts warned last night.

Downer: The only way is up for power bills

Typical household bills could leap by £500 a year by 2015 as suppliers pass on the costs of rising wholesale prices, broker Deutsche Bank says.

The warning comes two days after the Bank of England signalled more misery for homeowners with a likely rise in interest rates.

And it follows an unprecedented squeeze on take home pay from tax rises, record fuel prices and meagre pay rises or pay freezes.

The hike in fuel bills is expected as Britain becomes more reliant on imported gas. It will also be needed to pay for the new generation of nuclear power stations, the upgrading of the national grid and the creation of thousands of wind turbines to meet Europe's tough climate change targets.

The prediction comes after Centrica - the parent company of British Gas - warned the wholesale price of gas and electricity next winter will be 25% higher than last year.

Energy firms pay for their fuel months in advance and the price paid for fuel by households has yet to reflect the hike.

Deutsche Bank forecasts that the average dual-fuel bill could rise by 30% to 50% in the next four years - to between £1,300 and £1,600. That would be between £170 and £470 higher than existing bills.

'Sharp increases would be needed in the next 12 months, with prices rising to record levels from 2013 onwards,' the analyst Martin Brough said. If Centrica increases prices, other companies will follow suit.

Energy prices are under investigation by Ofgem. In its initial report, published in March, the regulator said energy companies raised prices faster in response to rising costs than they cut them when costs fell. It also threatened the industry with a referral to the Competition Commission if suppliers did not auction between 10% and 20% of their electricity output to allow smaller firms to enter the market.

The last round of fuel price increases ended in March when fuel bills rose by an average of six%, or £63. However, the crisis in the Middle East and Japanese tsunami and nuclear disaster is expected to see costs go up even more.

Earlier this week the Bank of England Governor Mervyn King predicted a hike of up to 15% in gas prices this year.