Utility Week

Utility Week 6th December

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Page 14 of 31

Policy & Regulation Analysis Energy bills to fall by £50 Following David Cameron's promise to 'roll back green levies', the government has announced a suite of changes that should shave £50 off annual energy bills. Megan Darby reports. H ouseholders will get an average £50 saving off next year's energy bill after government announced cuts to "green levies" this week. The Department of Energy and Climate Change (Decc) agreed to water down energy efficiency targets and pay for measures through taxation to ease the burden on consumers. It says changes to the Energy Company Obligation (Eco) will cut £30-35 from the bill. The government will cover the cost of the Warm Home Discount, saving a further £12. Distribution network operators have offered price cuts worth £5 to the typical home. Decc offset the carbon impact of loosening obligations on energy companies with new energy efficiency incentives costing £540 million and yet-to-be announced transport policies. Taken with the £600 million Warm Home Discount rebate, the package Comment Rolling back 'green levies' Megan Darby on what has changed and who benefits. I t is ironic, given all the rhetoric about rolling back "green levies", that the government's energy bill discount scheme is supposedly carbon neutral. Decc has sliced £50 off household bills without sacrificing a single carbon saving, by some clever feat of accounting. What has changed is who pays and who benefits. The options for cutting policy costs were always limited. Given the already jittery state of investors, any retrospective changes to renewable subsidies – the bit your average punter might imagine "green levies" to entail – would have been catastrophic. The carbon floor price, roundly will cost the Exchequer more than a billion pounds. Home buyers will be offered incentives of up to £1,000 towards energy efficiency measures when they move, and private landlords are to get support to treat the draughtiest homes. There will be a £90 million pot to upgrade hospitals, schools and other public buildings. The big six suppliers pledged to pass on the savings. British Gas said it would reduce its planned price rise in January by £53. EDF Energy had announced a lower price rise than its rivals, of 3.9 per cent, in anticipation of the government's measures. At the time of going to press, Eon had yet to reveal whether and by how much it would raise prices next year, but it is expected to be a similar amount. The remaining three major suppliers could not confirm the exact sum they would reduce bills by. It is understood they are still negotiating with government over what credit they will be given for work already undertaken towards Eco. Decc has cut by a third the Eco target for insulating hard-to-treat homes and has included cheaper measures such as loft insulation. Commitments to low income and vulnerable households have been preserved. Some were more supportive of the changes than others. Neil Clitheroe, chief executive of retail and generation at Scottish Power, said they "represent a strong commitment to have a more rational debate on energy policy". Eon UK chief executive Tony Cocker, on the other hand, expressed concern that cuts to solid wall insulation ambitions "may threaten a sustainable and growing part of the industry and exclude some households from the potential to have their homes made warmer". to middle class families living criticised as inequitable and inefin badly insulated Victorian fective, yields £1-2 billion a year in homes. It is to the governtax revenues, a sum the Treasury ment's credit that it preserved was not eager to surrender. its commitment to low-income That left the Energy Company and vulnerable households. Obligation (Eco) and the Warm The only target to be reduced, Home Discount for pensioners – by a third, is for "hard-to-treat" policies that are arguably more properties. social than "green". Paying for However, to make up for the Warm Home Discount from the carbon impact of watertaxation is uncontroversial, if not "Eco has the down Eco, Decc is offercheap at £600 million. It means weakest lobby ing incentives to homebuyers ing people will pay according to their and private landlords to do up ability, not their energy need. to protect it" To make the number up to £50, Decc also their properties – hardly the neediest secclaimed credit for distribution network oper- tor of society. It is also counting on carbon ators cutting prices by an average of £5 next savings from public sector buildings and transport policies. year – nothing to do with retail policy. This package, worth over £1 billion, will Although the only levy with the potential to bring down household bills in the long be paid for by a crackdown on tax dodgers, term, by boosting energy efficiency, Eco has according to George Osborne. Who knew the weakest lobby to protect it. Installing insu- that was going so well? Overall, this is no victory for the little lation is a responsibility suppliers have shoulguy over the well-fed windfarm developer. dered with varying degrees of reluctance. Energy minister Michael Fallon claims It is a handful of accounting tweaks that the changes are ending unfair cross-subsidy leaves big questions going into the election. UTILITY WEEK | 6th - 12th December 2013 | 15

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