Energy News

Green measures will add 10% to energy bills

Thursday 15 December, 2011

By Martin Fagan

Recent rises down to increasing wholesale gas prices but green measures will hike bills, admits government.

Energy bills will increase 10% by 2020, according to the latest report from the Committee on Climate Change (CCC).

The Committee, which reports to parliament on the government's progress in reducing emissions, said its “best estimate” showed the government's low-carbon policies will add £110 to average household energy bills in 2020, compared with an average bill of £1,060 in 2010.

However, the main conclusion of the CCC’s latest report is that recent increases in energy bills were due primarily to the increased cost of wholesale gas. The Committee says its findings “disprove often repeated claims” that recent bill increases are mainly due to environmental policy costs.

The Committee says its analysis focused on the 84% of UK households (21 million) that use gas for heating. For these households, energy bills increased from an average £605 per household in 2004 to £1,060 in 2010, a rise of 75%.

Of this increase, 84% (£380) was unrelated to low-carbon measures and was down to increases in the wholesale price of gas, escalating transmission and distribution costs and VAT. The CCC said that “around” £75 (16%) of the increase in bills was due to policies that reduce carbon emissions.

“We were keen to provide a dispassionate analysis of household bill impacts in what has become a politically controversial area,” said Lord Adair Turner, chair of the Committee on Climate Change.

“We found that bills have increased primarily in response to increased wholesale gas costs and not due to environmental policies. Over the next decade, we anticipate a rise of around £100 in the average bill as a result of investment in low-carbon power capacity, which will benefit the UK in the long run.”

Nevertheless, the Committee admitted that households with electric heating (9% of the UK) could be disproportionately affected by future costs of low-carbon measures as these will predominantly fall on electricity bills.

Responding to the CCC’s report, Audrey Gallacher, director of energy at watchdog Consumer Focus, said: “Consumer Focus agrees with the CCC that increased wholesale prices are the main reason behind recent energy price rises. However measures which are essential to make our energy supply greener and more secure are also having an inevitable impact on consumers' bills.

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