Alistair Buchanan, Ofgem chief executive, claimed that consumers, as well as businesses, should prepare for higher prices at a time when an increasing number of older people are being plunged into fuel poverty.
He warned that the British energy market would become tighter as a result of power plants closing, foreign gas supplies shrinking and increasing demand.
‘We have to face the likelihood that avoiding power shortages will also carry a price,’ Mr Buchanan said, writing in the Daily Telegraph.
‘If you can imagine a ride on a rollercoaster at a fairground, then this winter we are at the top of the circuit and we head downhill – fast.’
Ofgem predicts that within three years the reserve margin of generation will fall dramatically from below 14% to below 5%.
As is stands, about 10% of current generation stock is set to go next month due to coal and oil-fired power stations closing earlier than expected to meet environmental targets.
Elsewhere, world demand for gas is poised to tighten as expected gas supplies from the Russian Shtokman field are cancelled, China’s demand rises by 20% annually and Asian gas shoots up in price to 60% more than UK supplies.