Energy groups point to green policies for bill rises
Government initiatives add £134 a year per household, says power group
UK households face a 42 per cent rise in the amount they pay to support government green energy initiatives, according to an analysis by one of the UK’s big independent power suppliers.
Consumers help fund the provision of smart meters that reduce electricity use and subsidy schemes to encourage low carbon technology through their energy bills. First Utility, one of the UK’s biggest independent energy suppliers has calculated that the cost of funding these and other schemes will rise to £134.20 per customer per year from April, up from £94.50 in the previous year.
At present, a typical “dual fuel” bill for gas and electricity for customers on the most common standard variable tariff is about £1,088 a year.
The biggest renewable subsidy cost to consumers is from “renewables obligation certificates” — a support scheme for large renewable energy projects. According to First Utility's analysis, it accounts for £68.80 of the £134.20 total.
The renewables obligation scheme will close to all new generating capacity at the end of next month but the costs of other schemes — such as the “capacity auctions” that the government runs to buy guaranteed power generation during periods of high demand — are also rising.
All three of the big six energy providers that have so far announced price rises this year — Npower, EDF Energy and ScottishPower — have cited an increase in compulsory costs such as delivering government policies, as well as rising wholesale prices, for their decisions.
Darren Braham, co-founder of First Utility, said there was not always a “huge amount of transparency” about the cost to consumers of energy policies.
But the industry’s case is unlikely to damp political and consumer anger over household energy bills. Wholesale costs have risen but Centrica, a big six provider that owns British Gas, still managed to extend a freeze in bills for customers on its standard energy tariff until August.
The Department for Business, Energy and Industrial Strategy praised British Gas and said price rises by other power suppliers were “completely unacceptable”.
Ofgem, the energy regulator, has said it sees no “obvious” reason why bills should rise, because large suppliers buy energy as much as two years in advance.
The energy market is expected to feature in a government green paper discussion document to be published in the spring on markets that are “not functioning fairly” for all consumers.
Gillian Guy, chief executive of the Citizens Advice charity, said: “We see little reason why suppliers can’t choose to hold off raising bills for loyal customers on the standard tariff — British Gas has shown this is possible.”
First Utility has proposed that customers who have remained on expensive standard rates for a number of years should be automatically transferred on to their supplier’s cheapest rate.