Energy companies are gearing up to increase household fuel bills by removing the cheapest gas and electricity deals from the market.
Annual bills might rise by as much as £200 over the next year, according to one price comparison site.
The Bank of England stated in its recent inflation report that the UK would see a 15 per cent rise in domestic gas prices and 10 per cent rise in electricity tariffs between July and March 2012, driven by turmoil in the Middle East.
Energy companies have already moved to scrap the cheapest deals available. Scottish Power and Eon both removed the best online deals available at the start of May, increasing the lowest rate available by slightly more than £50. The cheapest deals were about £900 at the start of the year but are now about £950.
The report followed an announcement from Centrica, owner of British Gas, that wholesale energy costs this winter would increase 25 per cent compared with the previous year. Scottish Power has also said that suppliers would probably have to raise prices in the coming months.
All providers pushed up prices for gas and electricity following the coldest winter in 100 years last year. Although there have since been tweaks to some offers, prices have continued to rise.
According to one charity, the cost of energy bills has become the fastest-growing financial problem for households. The National Debtline said that thousands of people were being pushed into debt by rising utility costs.
Britain must get used to price rises on fuel bills or face blackouts, Chris Huhne, the Energy and Climate Change Secretary, warned yesterday. Announcing a major shake-up of the power supply market, he insisted that increases in fuel bills would still be less than the rises predicted if the country did not invest in low carbon energy and relied on fossil fuels instead.
The reforms would help secure the £110 billion investment needed to replace the quarter of UK power stations which were set to close in the next decade, Mr Huhne added.
“We have 25 years of dithering on energy investment and now decision day is coming,” he said. “You can have investment or you can have blackouts. What do you want?”
The shake-up will see companies given long-term contracts guaranteeing a stable price for electricity from low-carbon sources, such as nuclear and renewables.
Mr Huhne said the deals would give investors the certainty needed to invest in power sources with high up-front costs — such as nuclear reactors and offshore wind farms — reducing the UK’s reliance on fossil fuels and the impact on consumers of rising gas and oil prices.