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Surge in energy bills predicted

Gas and electricity bills could shoot up by as much as 50 per cent over the next four years as suppliers seek to offset rising wholesale prices, an analyst at broker Deutsche Bank has forecast.

Bank of England governor Mervyn King has factored in a hike of up to 15 per cent in energy prices this year, but in a note on the prospects for British Gas owner Centrica, Deutsche Bank suggests even higher bills are on the cards from 2013 if suppliers try to protect profit margins.

On Monday, Centrica, which has about 16 million customers, said the wholesale price of gas and power for delivery next winter is around 25 per cent higher than last year, but the price paid by households has yet to reflect this higher price.

Deutsche Bank forecasts an average dual-fuel bill could rise by 30-50 per cent to between £1,300 and £1,600 by 2015 if the energy group tries to maintain a 5 per cent profit margin in its retail energy business.

“Sharp increases would be needed in the next 12 months, with prices rising to record levels from 2013 onwards,” analyst Martin Brough says.

The estimate reflects a forecast of oil prices of between 100-125 US dollars a barrel in 2015, gas prices hitting between 72p and 89p per therm and rising environmental costs.

The broker concedes price increases of that magnitude would face stiff resistance both from the public and government, but argues that even if there were further regulation of energy supply, long run retail margins would still be at least 5 per cent.