Government imposed eco-subsidies are said to have contributed to a recent spate of energy price hikes. But are these ‘green taxes’ really to blame? Jess McCabe investigates
Putting the heating on has just become much more expensive. Let alone keeping the lights on, TV humming, kettle boiling and the whole family’s phones charged. At the time of going to press, four out of the six main energy suppliers had announced price rises, with npower leading the way with a 10.4 per cent inflation-busting rise from 1 December. And this is on top of price rises that have driven average annual dual-fuel bills from £610 in 2004 to £1,130 in 2012, according to the Committee on Climate Change, the independent, government advisor.
Energy firms have been keen to pin part of the blame for the most recent rises on green levies, such as subsidies that wind farms and solar panels accrue whenever they are generating electricity. The price rises also reflect the obligation on energy companies to invest £1.3 billion a year in energy-saving measures, such as external wall insulation, which many social landlords consider crucial for plans to upgrade their stock and ensure tenants can afford to heat their homes this winter and in the years to come.
During prime minister’s questions in October, David Cameron said: ‘I want better deals for consumers. But yes, we also need to roll back the green charges.’
Energy secretary Edward Davey, a Liberal Democrat, however issued a statement on 24 October saying: ‘With 15 independent energy suppliers to choose from outside the “big six”, it’s surprising these companies think they can keep getting away with bill hikes of this magnitude.’
SSE, one of the big six, is putting up its prices by 8.2 per cent, adding an average of £93 to its customers’ annual bill. Will Morris, group managing director of retail at SSE, explained when announcing the rise: ‘We’re sorry we have to do this. We’ve done as much as we could to keep prices down, but the reality is that buying wholesale energy in global markets, delivering it to customers’ homes, and government-imposed levies collected through bills - endorsed by all the major parties - all cost more than they did last year.’
But energy companies’ estimates of the impact that green levies are having on the bills that drop through our letter boxes are hotly contested. The CCC, an independent, government-funded body that gives advice on the nation’s climate policy estimates that such charges should add just £10 during the 2013/14 financial year. ECO accounts for just £1.50 of this.
The think tank Institute for Public Policy Research, having analysed the average £93 price rise announced by SSE, put the amount attributable to green charges at only slightly higher at £15.
Annual household energy bill (2013) £1,267 graphic
*Excluding carbon costs. All figures in real 2012 prices. Based on consumption of 14.8 megawatt hours electricity. Figures may not add due to rounding. Source: Department of Energy and Climate Change