ENERGY FIRMS SLAMMED

A major report by MPs has warned that swingeing green stealth levies on energy bills are ‘perverse’ and should be scrapped.

MPs also call for middle-class pensioners to lose their winter fuel allowance, with the savings redirected to help low-income households insulate their homes.

They have also attacked the regulator OFGEM for failing to hold giant energy firms to account for soaring prices.

The findings were delivered in a report by the Commons energy and climate change committee, which warns that, based on Government estimates, green levies will add a third to electricity prices by 2020 – even before likely rises in wholesale prices are factored in.

The Government has been accused of using stealth taxes to fund the huge subsidies given to green energy firms. These are needed, ministers say, to meet controversial carbon reduction targets set by the last government.

But MPs on the Commons energy and climate committee have warned that most families have no idea that the green energy drive is costing them dear. Their report states:

… There is no widespread understanding by consumers of how much of their bills is made up of levies.

The average family pays £1,267 towards energy bills, with £112 comprising green taxes – £18 of which is directly spent on subsidising giant wind farms. By 2020 the contribution will have increased by more than 150 per cent, with each household estimated to pay £286 as part of their bills, according to the Department for Energy and Climate Change.

The committee’s report also says:

… Increasing use of levies on bills to fund energy and climate policies is problematic since it is likely to hit hardest those least able to pay.

MPs on the committee suggested that if the green subsidies are to continue they should be funded through the tax system which is more transparent and ‘less regressive than the levies’.

The report questions the repeated claims by ministers that families will see lower bills as a result of Government policies, which include measures to promote energy efficiency. The committee is calling on ministers to start an ‘honest conversation’ about the fact that energy bills are highly likely to continue to rise.

Since 2007, average prices of gas and electricity have increased by 41 per cent – 20 per cent in real terms – leaving millions of households in ‘fuel poverty’. MPs warned that the public’s ‘deep mistrust’ of energy providers will continue unless they show greater transparency and reassure households that high prices are not fuelling excessive profits.

The Renewable Energy Foundation, a think tank, says there is little or nothing to be said in favour of energy bill levies. They hurt the poor most, they reduce competition in the energy markets and make supplier-switching less effective. The Energy Foundation says that because the levies camouflage government taxation they reduce democratic accountability.

Green taxes account for nearly 10 per cent of energy bills. They include an EU-imposed levy on industry and power generators for each tonne of carbon dioxide emitted, the cost of which is then passed on to consumers.

Customers also cover the cost of energy companies’ obligation to source more electricity from costly renewable sources – such as offshore wind farms and biofuel, to reduce fossil fuel use – and the requirement for suppliers to install free or subsidised heat saving measure, such as loft insulation or draught-proofing.

Whilst David Cameron has ruled out any change to the winter fuel allowance before the election in 2015, the report by MPs re-opens the debate over whether better-off pensioners should continue to receive the payment which is worth up to £300 a year. The cross-party committee is urging ministers to introduce ‘better targeting of the winter fuel allowance through means-testing’ and to consider ‘how savings could be used to boost investment in energy efficiency programmes’.

MPs also said they were ‘disappointed at OFGEM’s slow progress’ in forcing the energy giants to reveal how much they are making from household bills.

The regulator must ‘use its teeth’ and force energy firms to explain the reasons behind price rises, the report says.

Energy firms were also criticised for ‘falling far short of what is required to increase transparency’ as well as failing to improve consumer trust.

But Energy Secretary Ed Davey has rejected the suggestion that ministers were misleading the public over the impact of green measures on bills. He said:

… Our policies to support renewable energy and reduce energy waste are insulating consumers from the rising cost of fossil fuels.

… And by 2020, our analysis shows household energy bills will on average be £166 lower than they would if we did nothing.

COMMENT

After years of relentless price rises, families across Britain are already struggling to pay electric and gas bills which, on average, include £112 in green taxes and levies.

Yet, as Westminster’s climate and energy committee has warned, this crisis is to get much worse – with the value of these ‘perverse’ levies rocketing by 150 per cent between now and 2020.

On countless occasions, government ministers and supine regulators have promised they will force energy companies to introduce simplified, easily comparable tariffs and bills the public can readily understand.

Yet still the obfuscation goes on. As utility charges soar – along with profits for the Big Six – customers remain saddled with indecipherable bills that leave them dumbfounded over whether they are getting the best deal. Charitable organisations, including the Citizen’s Advisory Service, are receiving record numbers of calls from desperate households struggling with debts, after energy bills have rocketed by as much as 40 per cent in real terms since 2007.

And with yet more increases threatened on top of the 11 per cent so far this year, those on fixed low incomes will suffer the most. How much longer can the authorities stand by while this ruthless exploitation continues?

There are many things that could be done. For instance, minsters could scrap the posturing green taxes that already add £112 to average bills. This could be done at a stroke. The regulator, OFGEM, could also do far more by ensuring gas and electricity companies are more transparent and straightforward in their dealings.