Price for cutting carbon 'is 32% rise in bills'

Britain would end up with the highest energy prices in Europe, according to the Consumers' Association, as a result of subsidies to promote the building of new nuclear power plants and wind turbines for the renewables sector.

But energy secretary Chris Huhne, who will launch a white paper tomorrow on changes to the energy sector, insisted the UK had the lowest prices in Europe and rejected suggestions of massive rises ahead.

The Energy Market Reform (EMR), led by the Department of Energy and Climate Change, is described as the most significant change to the power market since privatisation in the 1990s.

But a report on the effects of the EMR for the Consumers' Association by the Energy Policy Research Group at Cambridge University said household bills are expected to rise by 32 per cent by 2030.

That was written before British Gas raised gas and electricity prices by an average of 18 per cent and 16 per cent respectively from 18 August, hitting nine million customers.

The average dual fuel bill will rise by 190 a year to 1,219.

Last month, ScottishPower announced a similar hike in bills and the rest of the "big six" suppliers are expected to follow suit in coming weeks.

Legal requirements to lower carbon emissions, but resistance from energy firms to invest in building new nuclear or renewable power sources, are expected to push Mr Huhne to offer firms a fixed price for electricity generation. This would be higher than the market price.

Consumers will ultimately foot the cost of funding the subsidies, with single pensioners likely to be hit hardest by the price rises.

David Hunter, with Dunfermline-based energy consultants M&C Energy Group, said so many factors had an effect on consumer prices it was difficult to get an accurate picture.

But he said: "It's difficult to prove or disprove 32 per cent. But I would not discount it. It's quite possible.

"Price rises can and probably will be greater than 32 per cent by 2030 when you consider other factors. Energy is just going to cost more and more.

"At the root of the problem, the country appears to be moving towards wanting to avert climate change by greening the economy. That means you need alternatives.

"Short of a massive scientific breakthrough delivering free energy, then the long-term forecast is for energy price rises."

Scottish Renewables last night insisted that while renewable energy was more costly now, with the price of oil and gas continuing to climb, they would ultimately be cheaper.

Chief executive Niall Stuart said: "New clean forms of energy generation are more expensive than older forms but, over time, they will come down. These reforms are designed to limit the impact from renewable prices."

Mr Huhne dismissed the claim of a 30 per cent rise in bills as "extraordinarily rubbish" and said prices would be reduced.

He said: "We're not going to have the highest prices. That's absolute nonsense.

"The reality is we have some of the lowest energy prices in Europe. We could get them even lower.

"There's one thing that a British energy secretary cannot do and that is control events in the Middle East.

"If we want to get out from under the volatility of these world markets, the best way we can do it is to save energy, make our bills much less sensitive to world market prices and get on in the long-term - get on to clean, secure, green energy sources which don't bounce around with world oil and gas prices."

He urged people to use price-comparison websites to save money.

"Switching is a really effective means of the consumer taking some power," he said.

"And we've also introduced, since the government came in, a new assurance that people have to be given 30 days' notice before the companies put up their prices."

Energy minister Fergus Ewing said the Scottish Government was working to ensure the reform sufficiently promoted renewables.