Household energy bills could rise by almost £550 a year to fund a range of investments including renewable energy sources and the roll-out of smart meters, new research from Uswitch.com, the comparison site, reveals.
Releasing details of its five-year settlement with energy companies today, Ofgem, the energy regulator, said British households would see their electricity bills rise by an average of £4.30 a year to help pay for the £7.2 billion investment in the distribution network between 2010 and 2015.
However, data from Uswitch shows that this is just the tip of the iceberg as a broader £233.5 billion investment programme is expected to add £548 a year onto consumer energy bills.
However, Uswitch says price falls may be short-lived. It calculates that a range of multi-billion pound investments – including £112.5 billion on renewable energy generation, £52.1 billion on power plants and £13.4 billion on the roll-out of smart metering – will see energy bills rise to as much as £4,733 a year by 2020. The current cost of an average household energy bill is £1,239.
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Ann Robinson, director of consumer policy at Uswitch, said: “£4.30 a year may seem small fry but it’s a wake-up call for us all. This is just the beginning of a huge investment process that will lead to significantly higher household energy bills.
“The £5,000 a year energy bill may seem like an outside possibility, but we have to remember that energy bills doubled in the last five years alone? The fact is we are entering a new era of high cost energy and households will have to adapt their behaviour accordingly.”
Separate figures released today by NERA economic consulting, an energy consultancy, show the extent to which these investments are driving up bills. NERA said that, in spite of increasing energy bills, suppliers only make £9 profit a year per customer on electricity and £10 per year on gas.
There is no profit on the average duel fuel customer because of additional discounts usually offered to consumers.
Graham Shuttleworth, director of NERA, said: “Despite recent reductions in wholesale energy prices, energy suppliers are making little or no profit from providing energy to people at home.
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“Companies face a range of other costs which have been rising, such as the costs of new environmental programmes, the costs of providing help for low-income customers and the costs of bad debt. Contrary to popular belief, the energy supply companies are not making much money from supplying energy to people’s homes.”