The big six energy suppliers have agreed to pass on savings to customers, after it was announced over the weekend that the government would be rolling back some of the environmental and social taxes currently attached to energy bills.
The savings, according to George Osborne, will equate to around £50 for the average household. While not a huge saving, it’s worth noting that the UK is the second worst place for fuel poverty in Europe after Estonia, so the discount is therefore a welcome announcement for many consumers up and down the country.
There was an awful lot of noise when the government first indicated that it would be conducting a review on green levies. One of the very first responses to these indications came from business leaders, including one of the big six energy firms E.ON, who said that the proposals “defy belief”.
Commenting on a letter sent to Downing Street, industry leaders warned that cutting back on energy efficiency schemes could be dangerous.
Paul King, CEO of the UK Green Building Council, said, “Cutting back schemes designed to boost energy efficiency is an incredibly short-sighted view and one that will only result in higher bills in the medium to long-term for those most vulnerable from rocketing energy prices.”
Meanwhile the energy committee, a group of MPs charged with the task of investigating the possibility of rolling back levies, warned the prime minister that to do so could “undermine investor confidence”.
But the government had evidently taken this as much ado about nothing, and instead took the decision to roll back green levies on bills, instead moving them into general taxation. Osborne said this will be funded by a crackdown on corporate tax avoidance.
But if we look at the practicalities of the move, what will it actually mean for consumers and what will it mean for progress on environmental efforts?
The day after the announcement was made, three of the big six energy companies that had already announced increases said that they would pass on the savings to consumers which will cost them absolutely nothing. But the fact remains that consumers will still be paying an average of £61 a year extra to what they will have paid on average last year.
Advice from consumer groups on Monday morning echoed that of the government when initial hikes were announced: switching is the best way to avoid the most dramatic increases.
Clare Francis, editor-in-chief at MoneySuperMarket.com, said, “Any reduction to energy bills is good news for struggling consumers but this isn’t the move that will finally make energy more affordable for UK households.”
She added that delays in the process of passing on savings were simply not good enough, warning that the UK is now entering the coldest time of the year: “This move to reduce the cost of energy is by no means a cue for billpayers to sit back and do nothing. Annual energy costs should fall by around £50 but this won’t be enough to offset the recent price hikes average £111 so it is still really important that people make sure they are on the cheapest tariff available as there are still savings to be made.”
It seems then, that the best way for customers to save money at this point in time is to switch, and there are a number of good alternatives out there that can save customers money on their bills.
On Friday, Good Energy and Ecotricity, two leading renewable energy suppliers, took the unprecedented steps of freezing their gas and electricity prices until the end of winter. The moves set the pair aside from the big six firms that have announced price hikes of as much as 10.4% in recent weeks. One Good Energy customer told the BBC’s Question Time last month, “My energy bills have never been cheaper.”
But what about these so-called ‘green levies’, and what will rolling them back mean for the industry as a whole?
Andrew Warren, director for the Association for the Conservation of Energy said that the government had destroyed measures that, in the long-term, would see energy bills decrease.
He told the BBC Radio 4 Today programme on Monday that energy companies had been “deliberately” diverting attention during the review over energy price increases from energy efficiency measures, paid for by green levies, because ultimately, the failure of such measures would mean that consumer buy more energy from them.
“We anticipated it [home energy efficiency schemes] running at the same sort of level through to 2022 in which case we would have dealt with much of the housing stock”, he said.
Warren added that the schemes supported low income people who were living in badly insulated homes, and that the number of homes being insulated every year will “crash down” from 80,000 to about 25,000.
Energy secretary Ed Davey told the same programme that 25,000 per year would be only a minimum: “Consumers are the ones winning today with an average of £50 off household energy bills, but we’ve managed to do that while protecting the fuel poor. I’ve always said that was critical for my approach and we’ve achieved that and we’ve done that by maintaining our green energy policies.”
Davey announced £540m of investment in energy efficiency schemes, but said that this would only be available under the new rules to those moving homes.
Friends of the Earth energy campaigner Sophie Neuburg said the government had “crumbled in response to pressure from the big six, leaving the fuel poor and the environment to pick up the bill.”
Neuburg went on to say, “The effect of all the measures announced today is that funding for energy efficiency has fallen by over £700m, condemning thousands of people to shiver in heat-leaking homes. If ministers were serious about tackling fuel bills they would introduce a comprehensive energy efficiency programme and take urgent steps to wean our economy off increasingly costly fossil fuels – the real driving force behind rocketing fuel bills.”
Whatever the pros and cons to the whole debacle, the energy market faces a very uncertain future. The government has caved into pressure from energy suppliers, who ultimately say that investment in a greener, more sustainable energy infrastructure should be paid for by the consumer and not from their profits, which have increased by 77% in the last year alone.
More worryingly, though, there are more and more people now working on zero-hour contracts, unpaid internships and being paid less than the minimum living wage and it is those people who will be bearing the brunt of these price rises.
Politicians in Whitehall need to stop using energy as a political football and pull together to help those most hard-pressed, whilst also ensuring that people get the right help to ensure their homes are more energy efficient and less dependent on energy from fossil fuels, which fuel climate change and more basically, pollute the only planet we have.
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