Blaming green energy for price rises doesn’t add up

Attempts to blame green policies for energy rises have come under the microscope today together with support, from an unusual source, for Labour’s energy price freeze.

According to a new TUC analysis gas and electricity prices have increased by four times the rate of inflation over the past 10 years. Energy costs rose by 152% from September 2003 to September 2013, the RPI by 38%. TUC General Secretary Frances O’Grady said, “Energy chiefs tried to blame green obligations for the size of consumer bills. Bills have been sky-rocketing for years, and the British people are fed up with it.” Evidence also shows fossil fuel subsidies far higher than support for environmental policies.

Left Foot Forward highlight a report from the Department of Energy and Climate Change that shows average household dual fuel bills have increased by around 13 per cent in real terms between 2010 and 2012. It adds that the main drivers of the increase were:

  • Wholesale energy costs, estimated to have contributed at least 60 per cent of the increase in household energy bills over this period;
  • Network costs, supplier operating costs and margins, estimated to have contributed around 25 per cent of the increase;
  • The costs of energy and climate change policies estimated to have contributed around 15 per cent of the increase. This accounts for the cost of the Warm Home Discount, but not the rebates it delivers to eligible consumers. This also does not take account of the energy bills savings from energy efficiency policies.

In the short-term there will indeed be a small increase in annual bills due to green policies. However, this is a fraction of the total cost of the average bill and can easily be offset by measures which make homes more energy efficient. Having said that, there is a credible case for separating these costs from energy bills as Nicola Sturgeon announced would happen in an independent Scotland at the SNP conference. It is regressive to put this cost on energy bills.

Meanwhile, NPower join the energy price increase announcements with a huge 10.4% increase. Yet it was reported in April of this year that, despite raking in an estimated £766 million in profit over the last three years, the company paid no corporation tax. Energy companies really don’t do themselves many PR favours!

Even Tory guru Lord Saatchi, has cautioned against underestimating the potency of Ed Miliband’s argument on wealth inequality and energy bills. Lord Saatchi said the last few decades had seen the creation of “global cartels” in areas such as banking and energy, where there was a “huge imbalance of power between the individual customer and the giant corporation”. Writing in a Sunday newspaper, he said: “The overwhelming power of money in such a climate is a dangerous moment for Conservatism. What scares people most is soon money will talk in health as well as everything else … People may conclude they need someone to protect them from that kind of ‘free market’, such as, perhaps, the state. This is why Labour thinks they have struck gold with a state price freeze on energy.”

I was listening to Question Time at the weekend and it was no surprise when the biggest applause of the programme was for a member of the audience who called for re-nationalisation. Politicians argue over modest market interventions, while the public wants something more radical.

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