Government denies press claims on £200 ‘green tax’ cost

  • 01 Aug 2011, 11:00
  • Neil Roberts

Recent media claims that government energy and climate policies are adding £200 to household energy bills are " untrue" the Department of Energy and Climate Change said yesterday.

DECC was responding to a barrage of recent claims about how much climate policies are contributing to fuel bills.

The Mail in particular claimed (as reported in detail by the Carbon Brief) that DECC energy efficiency and carbon reduction policies are adding around £200 a year of the average energy bill. This figure came from Lord Lawson's skeptic lobby group, the GWPF, but didn't seem to accord with estimates from Ofgem and DECC.

Now DECC have for the first time publicly commented on this figure. A blog post by DECC economic advisor Christalla Kyriacou says:

"Recent reports in the media have claimed that DECC's policies to promote energy efficiency and low carbon energy are currently adding £200 to the average household energy bill ... This is not true.

"Analysis by both DECC and the independent regulator, Ofgem, puts this figure at around £70 to £90 (or 7% to 8%)."

The post provides the DECC calculation for what they say the real current price impact on energy bills is:  

"So what's the right answer?

To determine what the impact of policies is on the two bills identified (based on DECC's July 2010 estimates), the following figures need to be applied:

•    Policies add 4% or £1/MWh to the average gas price, taking it up to £36/MWh. This means policies represent 1/36=4% of the average gas price and bill in 2010.

•    Policies add 14% or £15/MWh to the average electricity price, taking it up to £122/MWh. This means that policies represent 15/122=12% of the average electricity price and bill in 2010 (not 14%).

Applying these to the same bills we get (figures may not add due to rounding):
4% of £608 = £22
12% of £424 = £51
£22 + £51 = £73 (or 7% of the average household's dual fuel bill)"

Finally, Ms Kyriacou explains what these costs are paying for and why DECC believes "the net impact of these policies on a household which takes up an energy efficiency measure under these schemes will likely be to reduce their energy bill."

DECC's statement should be welcomed because it means these government figures can now be interrogated and assessed in more detail. By contrast, the £200 claim has still not been sourced. 

Whether the Mail, and other papers, now review the figures they use in light of this new information remains to be seen. Energy bills are likely to rise over the coming years, because of both rising fossil fuel prices and government moves to replace energy infrastructure. More transparency and accuracy in the way the issue is discussed will benefit everyone.

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