Gas prices are to blame for rising energy bills says Ofgem, not green policies
- 14 Oct 2011, 11:00
- Christian Hunt
released today by Ofgem debunk the argument that 'green
taxes' are responsible for rising energy bills, showing that the
proportion of bills attributable to 'environmental and social'
costs has fallen since the beginning of the year.
In an accompanying factsheet entitled 'Why are energy prices
rising?' Ofgem are clear that energy bills are escalating largely
because of increasing
"Higher gas prices have been the main
driver of increasing energy bills over the last eight years. As the
graph below shows, Britain enjoyed a period of falling gas prices
until 2004/05. This is the year that Britain first imported more
gas than it produced itself. Becoming more reliant on imported gas
has meant that British gas prices have become increasingly
influenced by global events..."
According to the Ofgem figures, as of this end of September the
price of this winter's gas is around
40% higher than last winter's.
The Ofgem Electricity and Gas Supply Market reform report,
here, shows that as the average bill has risen, the proportion
of the average energy bill consumers pay in 'environmental and
social supplier obligations' - (what some like to call 'green
stealth taxes') - hasn't kept pace, falling to 6% (p.16) of an
average dual fuel bill, down from Ofgem's
previous assessment of 8%, which was made in March
Environmental policies also add some costs which Ofgem classify
under 'wholesale' costs, which is why
overall Ofgem believe:
"At the moment, the cost of Government
environmental and energy efficiency programmes adds around £100 on
to the average energy bill of £1,300."
Ofgem also note that "greater reliance on non-fossil fuels such
as nuclear and renewables, could reduce Britain's dependence on gas
In the period since January the average bill has risen from a
£1032 to £1345 (p.7), due largely to rising gas prices. (Ofgem
have also brought their assessment of what constitutes average
household use in line with DECC's assessment - but this doesn't
affect the analysis of how the bill is broken down.)
This is ground that we have
covered fairly extensively already, but the Ofgem numbers are
important because they are regarded as an authoritative assessment
of the costs of energy to consumers. It's ironic that Ofgem's
assessment shows it's the rising price of gas which is causing fuel
bills to rise, given that this is the
fuel promoted by the climate skeptics who have been the most
vocal in blaming green policies.
Many of the alarming news pieces that have suggested or implied
that green policies have been responsible for rising energy bills
have turned out (charitably) to be based on rather peculiar
interpretations of research into energy prices.
The Daily Mail's campaign on green taxes and energy bills -
dreamed up at a lunch between Paul Dacre and ex-chancellor and
climate skeptic lobbyist Lord Lawson - relied heavily on
figures from Lawson's Global Warming Policy Foundation (who also
put their resources towards extolling the virtues of gas). They
argued that an average household paid up to £200 on their energy
bill for 'green taxes'. This figure was
never sourced, despite receiving extensive attention in the
Mail, and the paper corrected
it after we complained to the Press Complaints Commission.
Once again, the figures from Ofgem show this coverage to have
been highly inaccurate and misleading, at a time when rising
household energy bills are a source of concern to many.
The current structure of the energy market also seems to have
created a window of opportunity for power companies to rake
in significantly more money from their customers - the report also
shows a 'significant rise of the net [profit] margin on supplying a
typical, standard tariff'.
In other words, the amount energy companies currently make out
of their customers is currently at a very high level, although
Ofgem suggests that it is likely to fall over the coming year.
Ofgem are currently
investigating energy company profits.