Energy bills could fall by 7pc if Government cuts green tax

November 10, 2013 by  
Filed under Green Energy News

At present, the ECO scheme demands that houses should be provided with cavity
wall insulation, which can cost up to £10,000.

Delaying the scheme will lead to only a 3pc fall in bills, the energy sector
has calculated.

It is not thought that such a small fall will be seen as sufficient by the
Government, which wants consumers to notice a significant fall in bills.

A 7pc drop, even if it funded by some increases in taxes, could see the
average bill of £1,300 pounds fall by £91 a year.

The Telegraph revealed in September that energy
companies were in late-stage negotiations with the Government over the ECO
scheme
.

Companies face fines of up to 10pc of turnover if they do not hit the
environmental targets and have said that the total cost of the scheme could
be as high as £3.1bn, or £125 on the average bill.

Energy companies have assured the Government that if there is any deal – which
now looks increasingly likely – they will announce immediately that they
will pass on the savings.

The Chancellor could make an announcement on a deal as early as the Autumn
Statement, which is scheduled for the first week of December. The Government
is keen to act after the Labour leader, Ed Miliband, announced
plans for an energy price freeze
if he were to win the next
election.

In a recent appearance before MPs, William Morris, SSE’s managing director,
said the price cut could happen “in a matter of weeks” from taxes being
taken off bills and suggested that the regulator Ofgem should oversee the
process.

It is also believed that Sam Laidlaw, chief executive of Centrica, the owner
of British Gas, has given a personal assurance to the Prime Minister that
the energy supplier will reduce bills straight away.

The proposals come as both Centrica and SSE are due to update the market this
week on their financial performance. Centrica is expected to give details of
Mr Laidlaw’s thinking on the possible ECO deal.

SSE is expected to announce that its household electricity and gas supply
business fell to a £100m operating loss for the six months to the end of
September, strengthening its arguments over the need for price rises which
energy companies have blamed on rising commodity and environmental costs.

The company reports half-year results on Wednesday. It has already announced
an 8.2pc price rise in bills, affecting about 4m customers, which comes into
force on Friday.

Analysts at Exane BNP Paribas forecast that the SSE group’s adjusted, pre-tax
profits will fall 19pc to £321m.

Despite the £100m operating loss forecast for the retail arm, SSE group is
still expected to return operating profits of £504m – down 15pc on last year
– thanks to its power generation and energy networks businesses, where
profits have risen.

The company has previously pointed to the fact it expects its retail arm to be
loss-making as justification for its price rise.

The company’s financial year-end of March means its profits are usually skewed
much more heavily to the second half when customers use more gas to heat
their homes in the winter months.

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