Watchdog warns of British energy crisis

Following an extensive consultation period, the watchdog unveiled a set of radical proposals for a "secure and sustainable" energy supply across Britain.

It acknowledged that sticking with the current market was "not an option" - barely two years after it declared privatisation was working - and hinted at nationalisation as a possible solution.

The report expressed "reasonable doubt" over the security and sustainability of the country's power supplies amid a perfect storm of the financial crisis, environmental targets, dependency on imported gas and the closure of ageing power stations.

It warned that failure to reform the energy system could mean power shortages after 2015, while inaction would lead to a "degree of crisis" in three or four years.

Ofgem has predicted that average household bills could jump as much as 25 per cent to nearly £2,000 without urgent action.

"The higher cost of gas and electricity may mean that increasing numbers of consumers are not able to afford adequate levels of energy to meet their requirements," the report stated.

Ofgem put forward a range of proposals it claimed would help release the estimated £200 billion Britain may need to invest by 2020 in order to ensure future supply.

The most far-reaching of these was a call for a "dramatic move away from competitive markets" and towards the creation of a central energy buyer that would set the amount and type of new power generation needed.

In short, the government could be forced to reverse Margaret Thatcher's privatisation of the energy market and renationalise the industry.

The report was endorsed by left economists, environmentalists and union leaders.

Left Economics Advisory Panel co-ordinator Andrew Fisher called for "renationalisation without compensation" and to use the surplus to secure the investment needed for publicly owned supplies that are sustainable and affordable.

"The major investment work needed has not happened despite years of massive profits and will not happen in the future," he stressed.

"The only solution is full nationalisation. The private energy companies have been ripping off consumers for long enough."

GMB national officer for utilities Gary Smith said that the report was "a death knell to the liberalised energy market. We now need the political courage to grasp this and look after people's needs."

And Friends of the Earth executive director Andy Atkins made the case for more substantial investment in renewable energy to protect the planet and our future.

"A commitment to radically reform the energy system must be a significant element of all the political party manifestos," he added.

Energy and Climate Change Secretary Ed Miliband insisted that the government was "confident" of meeting energy supply needs until 2020.

But he admitted that Britain would need more "interventionist energy policy" to deliver secure and sustainable supplies beyond 2020.