The episode I caught focused on gas and electric bills. Comments during the program suggest that this wasn’t the first time the program has dealt with major price increases in consumers’ electric bills.

The UK Dept of Energy & Climate Change’s website offers plenty of clues as to why many consumers are up in arms over their gas and electricity bills. Check out this graph of indexes that reflect UK gas and electricity prices.

Source: UK Dept of Energy & Climate Change

Retail natural-gas and electricity prices remained relatively stable in the UK until 2005-06, when these costs skyrocketed. The price of natural gas has climbed 115 percent since October 2005, while the price of electricity jumped 75 percent in the same period. In October 2011, UK gas prices were up more than 24 percent year over year and electricity prices had increased 14 percent.

These price increases dwarf the average rate of inflation and income growth; higher energy bills directly translate into lower disposable income and spending power for UK households. With some consumers’ annual gas and electric bills jumping by GPB500 to GBP700 (about USD750 to USD1,000), populist suspicions of price gouging by major utilities were inevitable.

But these price hikes aren’t a product of coordinated corporate malfeasance; rising commodity prices are largely to blame.

The picture couldn’t be more different in the US, where electricity prices average 11.76 cents per kilowatt-hour–an increase of about 1.8 percent from year-ago levels. With the US Consumer Price Index up roughly 3.5 percent year over year and 2.1 percent when food and energy are excluded, real US electricity prices are actually cheaper than in 2010.

Whereas the average UK consumer faces jaw-dropping price increases for gas and electricity this winter, the typical US household should see little impact. According to the US Energy Information Administration, the average household will spend 3 percent less on natural gas and 2 percent less on electricity than winter 2010-11.

Although Americans often complain about rising energy prices, this graph of nominal electricity prices demonstrates that US households have dodged the huge increase in electricity prices afflicting UK consumers. Note that I’ve adjusted the data for inflation to better reflect the impact of electricity prices on household budgets.

Source: Energy Information Administration

The real, inflation-adjusted cost of electricity generally has declined since 1990. The nominal price of residential electricity in the US has increased by about 25 percent since 2005-06–less than one-third of the surge in UK electricity prices. About 10.9 million households use natural gas for heating, an increase of more than 700,000 in the past eight years.

However, US consumers who warm their homes with heating oil (a crude-oil derivative) have suffered massive price increases in recent years and are expected to face an 8 percent jump in prices this year. Accordingly, the number of US households that rely on this heat source has declined by almost 1.5 million in the past eight years, to 5.5 million homes. The economic impact of rising heating oil prices continues to decline.

The US also enjoys a significant advantage relative to other developed countries when it comes to oil prices. As I explain in the Sept. 6, 2011, issue of The Energy Letter, Why US Gasoline Prices Remain Elevated, West Texas Intermediate crude oil has traded at a record discount to Brent and other international oil benchmarks for much of 2011.

The gulf between electricity prices in the US and UK doesn’t reflect price gouging on the part of British utilities–rest assured that their counterparts in the US are just as eager to make money and earn a return on their investment.

The surge in UK gas and electricity prices stems from waning production from the North Sea and the nation’s growing reliance on imported natural gas. Check out this graph of UK net oil and gas imports.

Source: BP Statistical Review of World Energy 2011

Rising oil and gas output from the North Sea in the late 1970s and early 1980s enabled the UK to be a net exporter of oil and natural gas, though the country relied on imports to offset seasonal lulls in or disruptions to production.

This resource base also prompted the country to construct a passel of inexpensive natural gas-fired power plants to generate electricity. This abundance of natural gas was a significant, if often overlooked, boon to the UK economy.

The parabolic rise in UK retail energy costs roughly coincided with the nation becoming a net importer of oil and gas in 2005. Waning domestic output forced the UK to compete for natural gas with the EU and import gas from Russia under contracts indexed to oil prices. The UK’s increasing reliance on imported gas also exposes the country to supply and demand shocks in the global market for natural gas.

The magnitude-9.0 earthquake that devastated Japan’s Tohoku region in March 2011 is a case in point. The damage from the quake forced the government to shut down many of the country’s nuclear reactors for stress tests. Although one shuttered nuclear power plant returned to operation in August, reports from Japan indicate that local opposition may delay some reactors from returning to service after the first phase of stress tests is completed.

With two of Tokyo Electric Power’s (Tokyo: 9501, OTC: TKECY) three nuclear power stations shut down after the March earthquake and tsunami, the utility is fast-tracking plans to expand its gas-fired capacity in 2012.

Japan’s imports of liquefied natural gas (LNG) have surged since the earthquake, and we expect this strength to continue into 2012-13.  

Meanwhile, the permanent damage to the Fukushima Dai-ichi reactor prompted Germany to immediately shutter some of its older nuclear power plants and announce plans to phase out its remaining reactors over the next decade. These moves will tighten the supply-demand balance even further. Without nuclear power, German demand for natural gas will increase substantially.

Given these demand pressures, it’s no surprise that UK natural-gas prices jumped as much as 40 percent after the Tohoku earthquake. Although prices have moderated slightly because of economic weakness in Europe, a cold snap could easily send them to a new high.

The situation couldn’t be different in North America, where natural-gas imports have declined dramatically over the past five years because of an influx of domestic output from unconventional plays such as the Marcellus Shale in Appalachia and Haynesville Shale in Louisiana. In fact, US gas production has surged to a record high and continues to grow, even though producers have shifted their emphasis to liquids-rich plays such as the Bakken Shale in North Dakota and the Eagle Ford Shale in south Texas.

But America’s declining reliance on imported oil hasn’t received as much publicity.

Source: BP Statistical Review of World Energy 2011

Although the US likely will never produce enough oil to satisfy internal demand, domestic output has increased for the first time in two decades. Our forecast calls for rising US oil output and flattish demand growth over the next few years.

But most Americans don’t recognize the enormity of the nation’s competitive advantage when it comes to energy. Despite the unceasing popularity of news stories that lament the rising cost of gasoline in the US, American consumers pay far less for energy than their peers in the UK.

This advantage has several important implications for investors.

1. Wind and Solar Power Aren’t Attractive Investments

Check out this graph depicting the retail cost of electricity in each EU nation and the prominence of non-hydroelectric alternative energy in each member-state’s energy mix.

Source: Personal Finance

As you can, see the more a country relies on alternative energy, the more consumers pay for electricity. Paying a little extra for green energy may be palatable when electricity prices are low; however, when customers already face price hikes of more than 20 percent, they’re likely to be less supportive of subsidizing alternative energy.

Germany already has slashed feed-in tariffs for renewable energy to keep costs from spiraling out of control, while a recent report published by the Adam Smith Institute explains how efforts to build out the UK’s wind-power capacity won’t improve the country’s energy independence. I wrote about the challenges facing alternative-energy companies at length in Popping the Green Bubble.

The real alternative is improving energy efficiency. Many companies have found that investing money to save energy can reduce costs significantly over the long term. This explains the rising popularity of fuel-efficient freight trains over long-haul trucking.

Avoid names that produce solar- and wind-power equipment and focus on companies that offer products and services that reduce energy consumption.

2. The Shale Oil and Gas Revolution Continues to Pick Up Steam

Our favorite oil and gas producers hold high-quality acreage in liquids-rich plays such as the Bakken Shale, the Eagle Ford Shale and the Permian Basin. Our top picks stand to benefit from rising production and elevated oil prices.

Meanwhile, investors seeking growth and income should consider the US-listed royalty trusts and master limited partnerships (MLP). Many producers are spinning off royalty trusts that yield well over 10 percent to help raise capital to fund their aggressive drilling programs in the nation’s shale plays. Marcellus Trust I (NYSE: ECT), which I highlighted in Trust in the Marcellus Shale, is one example of this trend.

By popular demand, the Dec. 22, 2011, issue of The Energy Strategist will profile some of our favorite MLPs that are building the pipelines and other infrastructure needed to support rising production from the nation’s prolific shale plays. Most of these MLPs offer tax-advantaged yields of 6 percent to 10 percent.

3. A Renaissance in US Manufacturing

A sustained period of low energy prices will prove a major advantage for energy-intensive industries. Fertilizer and petrochemical firms have already expanded existing facilities or announced plans to build new manufacturing capacity to take advantage of lower energy costs.

4. The LNG Boom

The UK and other European nations are seeking to diversify their supplies of natural gas, supplementing imports from Russia with LNG from North Africa, the Middle East and Australia. Rising demand for natural gas in Europe, coupled with increasing demand for LNG in Asia, should further tighten the supply-demand balance over the next two years. We covered these trends at length in Australia’s Got Gas.

Portfolio Roundup

Aggressive Portfolio holding SeaDrill (NYSE: SDRL) recently announced plans to spin off a minority interest in its Brazil-related operations in an initial public offering (IPO) on Brazil’s stock exchange. The new company likely will hold three deepwater drillng units into the new company and a planned joint venture with Malaysia’s Superacrest Petroleum, in which SeaDrill owns a 23.6 percent stake.

Like the company’s previous spin-off of some of its harsh-environment rigs in the North Sea, this IPO should give the company additional financial flexibility and provide additional funding to invest in building a presence in the lucrative Brazilian market. SeaDrill rates a buy up to 38.