British Gas boss warns UK energy bills are not going to fall any time soon

Energy prices for the typical UK home are likely to remain high for the foreseeable future with supplies vulnerable to external shocks, Centrica CEO Chris O'Shea has said.

As Ofgem's new price cap comes into effect this weekend, the average UK home's bills will be £2,074 — below the £2,500 level which was subsidised by the government under the energy price guarantee scheme.

Even under the price cap, household energy bills will remain £800 more expensive than two years ago.

"I think the first act of the crisis is over," said O'Shea on BBC Radio 4's Today programme. "I think what we've got to remember is the energy prices had more than doubled before Russia invaded Ukraine."

"Now, prices are back down to pre-invasion levels but they're still two-and-a-half times the long run average."

Read more: UK mortgage approvals increase in May but so do costs

Centrica, which owns energy giant British Gas, has announced it is doubling the amount of gas stored in its facility off the coast of Yorkshire ahead of this winter. Even with this, O'Shea said there was a danger of complacency about energy supplies, and vulnerability to external shocks.

"When we had trouble between the Wagner group and the Russian military last week we saw energy prices go up by about 20%. Chinese economic activity at the moment is relatively low. If that starts to pick up we'll see more demand for gas in the form of LNG [liquified natural gas], then we'll see European gas prices go up so there could be more volatility to come."

O'Shea added that he does not think we'll see prices for the average home dip below £2,000 and that he believes the government should consider a social tariff, which would mean more targeted help for those who need it.

The comments come as the cost of living crisis takes full hold in the UK. Earlier this week, Bloomberg Economics predicted that central bank rate hikes will push the UK into recession by the end of the year in its battle to curb inflation.

Read more: How to check if you’re owed up to £2,000 you never knew existed

A year-long recession will hit Britain in the final three months of the year assuming the Bank of England raises interest rates to 5.75% by November, economists Dan Hanson and Ana Andrade from Bloomberg Economics said.

Bloomberg Economics now forecasts that the UK economy will grow just 0.1% this year and shrink 1% in 2024, a sharp revision from the 0.3% growth previously estimated.

That assumes the BoE raises rates to 5.75% by November from the current 5%. However, markets are almost fully pricing in 6.25% by December, raising the possibility of a far worse slump.

Watch: Martin Lewis reveals how much energy bills are due to drop

Download the Yahoo Finance app, available for Apple and Android.