UK energy prices set to remain high for up to two years: Centrica CEO

UK natural gas and power prices are set to remain at high levels for up to two years as the fuel takes center stage in the energy transition, chief executive of UK utility Centrica Chris O'Shea said Jan. 12.

UK spot gas prices have risen 194% over the last 12 months, to be assessed by S&P Global Platts at 190 pence/therm Jan. 11, up from 67.18 p/th exactly a year ago.

"There's no reason to think energy prices will come down anytime soon," O'Shea told BBC Radio 4's Today program.

"The market suggests high gas prices will be here for the next 18 months to two years," he said.

Platts assessed Calendar Year 2023 UK gas at 117.65 p/th Jan. 11.

Natural gas would play a key role in the transition away from coal, O'Shea said.

"As you turn off coal-fired power stations in other countries, they develop more demand for gas -- but there is not an abundance of gas you can just turn on," he said.

UK consumers face a steep hike in energy bills from April 2022 once current wholesale costs are factored into standard variable tariffs.

O'Shea thought average dual fuel energy bills could climb over 50% to up to GBP2,000/year ($2,737/year).

Three things could be done by the government to halve the impact on bills for everyone, he said.

First, the cost of moving consumers from insolvent suppliers to last-resort suppliers could be deferred, saving around GBP100.

Second, VAT on bills could be taken off "temporarily or permanently", saving another GBP100.

And third, green levies "of around GBP175" could be removed from energy bills and transferred to general taxation.

"These things could be done very quickly and without regret, removing half of the price rise," he said.

Further relief could then be targeted at those households most in need.

In the latest estimates, around 13% of households (3.2 million) in England were classed as fuel poor, 25% in Scotland, 12% in Wales, and 18% in Northern Ireland.