Tag Archives: Ed Davey

Britain, Energy, Environment, Government, Politics, Society

Concern over energy firms refusing to pass on price cuts…

ENERGY BILLS

Intro: Millions of energy consumers on fixed deals will lose out

Millions of energy consumers with fixed price energy tariffs will not get a £50 reduction in utility bills as promised by David Cameron and George Osborne. A pledge was given this week in the Autumn Statement that electricity bills would be cut following the decision by the government to roll back some green levies.

The energy giant E.ON has announced that more than one million of its customers will get a reduction of only £12 – or 23p a week.

EDF is taking the same line with its one million fixed rate customers, who include many pensioners and families. Npower, SSE and Scottish Power may follow suit.

The Prime Minister, Chancellor George Osborne and Energy Secretary Ed Davey have made repeated pledges in their efforts to protect customers by rolling back environmental charges.

Mr Osborne said this week: ‘There’s going to be an average of £50 off people’s bills … We are absolutely insistent that this is going to be brought in.’

The smaller reduction of £12 covers the Government’s decision to switch funding of the Warm Homes Discount – a subsidy for poorer families – from energy bills to general taxation. The rest of the decrease was expected to come from changes to the Energy Companies’ Obligation Scheme, a levy applied to all bills to raise money for energy-saving measures for poorer households.

However, the element of the reduction is not being passed on to customers on fixed tariff deals by some companies.

In contrast, British Gas, the largest of the ‘big six’ suppliers, announced that all tariffs and payment methods will get a reduction of £53 from January 1.

A spokesperson for Consumer Futures, a campaign group, said: ‘The message has been that people were going to save £50 on their energy bill, but it seems a fair chunk of people will not get that. This sort of behaviour is not going to do anything to reassure customers … People feel confused and angry about their energy bills. This latest development just adds insult to injury.’

The spokesperson added: ‘I think in the current climate, bearing in mind how people are struggling, the right thing to do would be to apply the full reduction across the board. That is the expectation that the Government has created.’

Following the Autumn Statement, E.ON immediately announced a price rise of almost £60 a year for customers on standard tariffs. The changes will take effect from January 18.

The provider says that cutting the bills of fixed price customers by only £12 was justified because many of these people were already on relatively good price deals and tariffs.

EDF took a similar line and said its short-term fixed deal is some £90 a year cheaper than its new standard prices.

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Britain, Economic, Energy, European Union, Government, Politics, Society

Reduction in energy bills following the removal of green levies – a step in the right direction…

ENERGY BILLS

Householders will be somewhat relieved to hear that the UK government will be pegging back the recent increases made to electricity prices by all the major suppliers. The reduction is being made because the government is removing some of the green levies applied to bills to pay for policies designed to either reduce energy use or to encourage renewable energy development. These levies can be as much as 11 per cent that are directly added on to domestic bills. The impact of green levies on suppliers is to be lessened and the savings passed on to consumers. Utility bills will still go up by an average of around £70, rather than £123, a saving of about £50 this winter.

Changes are being made to two of these levies, the Energy Company Obligation, which commits energy firms under statute to assist with the costs and installation of better insulation, and the Warm Home Discount, which reduces bills for elderly consumers over 75. The idea is to transfer some of the money raised to pay from these schemes to general taxation so the taxpayer rather than the energy consumer foots the bill.

These charges are not being scrapped, but diverted. According to Ed Davey, the Energy Secretary, this will cost the taxpayer somewhere in the region of £600 million. The problem, however, goes much further than the bills themselves. Whilst Labour have proposed a freeze or cap on bills from 2015, this is wholly unrealistic since energy companies cannot control wholesale costs and will be required to invest for the future. The dilemma of market failure arising, something which is still to be investigated, will be attributable to Labour – because when the party took office in 1997, there were 17 companies in the energy sector that kept the market competitive. By the time Labour left office in 2010, there were just six remaining. Most analysts now perceive the energy market as operating like a cartel where energy prices are effectively rigged.

All the main political parties must share some responsibility for the confusing mess that passes for an energy policy. They are now engaged in a political battle over who can promise the lowest prices. Yet, the biggest problem concerns energy security.

Next winter looks certain to be affected by a coalescence of factors that will alter the capacity of the electricity system. A recently published report from the Royal Academy of Engineering suggests that the mothballing of gas-fired power plants and decarbonisation targets could lead to a ‘significant reduction in the resilience of the system’.

Undoubtedly, the cheapest way to generate electricity at the moment is by burning coal. The global price of coal has dropped substantially in recent months as coal mines in many parts of the world, including America, remain under-exploited. Yet, amendments to the UK Energy Bill are expected to force coal stations to close earlier than planned. In addition, there are also doubts in the medium term over the nuclear power programme planned at Hinkley Point, with questions in Brussels over the payments of subsidies to French and Chinese companies. Future supply, then, is the critical issue: energy consumers may be pleased to see their bills go up less than originally planned, even though many will still be paying for it through taxation. But they will be appalled if the lights go out. And for those who believe that green energy is greatly over-valued will complain that the government is just shifting the burden from one set of people to another.

The finer details of the changes also reveal that homebuyers will become eligible for a £1,000 contribution towards insulating their new home. Mr Davey has said this will be paid via a reduction in the stamp duty paid on the purchase price.

The changes to energy bills might just cause the energy companies and the government to be more transparent about exactly what makes up the unit price of gas and electricity on our bills. Hopefully, that might lead to them being more sensitive to that information, delivering consumers a far better deal in the longer term.

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Britain, Environment, Government

Energy firms heavily criticised by MPs on the Energy and Climate Change Committee…

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.

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