Cutting green energy levies may raise fuel bills, say MPs

November 16, 2013 by  
Filed under Green Energy News

Some of those levies go towards renewable energy sources like wind and solar
power, and are unpopular with many Conservatives.

Mr Cameron has promised to “roll back” green levies which he says add around
£112 a year to the average household bill.

Sir Robert Smith, the Liberal Democrat chairman of the Commons committee, has
written to Mr Cameron warning him that cutting the levies could actually
mean higher bills.

“We would urge you to be careful not to undermine the very problems the
Government is trying to solve,” he said.

Ending agreements to support renewable energy sources “will damage policy
credibility, seriously undermine investor confidence and could increase the
cost of capital for new energy investments – thus pushing up energy bills,”
Sir Robert said.

George Osborne, the Chancellor, is expected to set out cuts in green levies at
the Autumn Statement next month, though the final package has not yet been
agreed between the Conservatives and Lib Dems.

Industry sources say the Department of Energy and Climate Change was last
night due to hand Downing Street a number of options for reforming the
‘Energy Company Obligation’, one of the green levies that requires companies
to meet targets for insulating customers’ homes.

One option would see a target for installing expensive measures such as solid
wall insulation – which can cost £10,000 per household – cut by as much as
50pc.

Critics say this part of the scheme is poor value for money, especially given
the low take-up of the Green Deal loan scheme which was supposed to see
households part-finance the measures.

There could also be an increase in the target for cheaper measures which are
targeted at the poorest homes.

Ministers are also still considering an option of extending the March 2015
deadline for completing all the targets by at least 18 months, to spread the
costs of implementing the scheme.

Ministers say the scheme should cost only about £50 per household but some
suppliers argue it costs much more and have blamed it for recent bill
increased. British Gas claims it now costs about £90 on a household bill.

Companies have vowed to pass on savings in costs ‘pound for pound’ within
weeks of any green levies being cut. Several suppliers have lobbied for
green levies e to be removed from bills altogether and paid for through
general taxation instead. However, industry sources are not optimistic this
will meet Treasury approval.

Ministers are also still considering an option of extending the March 2015
deadline for completing all the targets by at least 18 months, to spread the
costs of implementing the scheme.

The CBI, a business lobby, has backed this option, calling for the scheme to
be extended to 2017.

Comments are closed.