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Want to understand energy bills?

  • 24 Nov 2011, 17:41
  • Robin Webster

" Green tax to rise every year" blared the front page of the Mail this morning - rather predictably - and then (in rather smaller type) "... but don't worry, ministers claim overall bills will be lower - because their policies will make you use less energy".

Why predictable? Because yesterday, the Department for Energy and Climate Change (DECC) published the latest iteration of its policy impacts document, which estimates the impact of energy and climate change policies on energy prices and bills.

The document, last updated in July 2010, was published alongside the government's Annual Energy Statement, which Chris Huhne delivered in a statement to Parliament at lunchtime. He also launched the Government's long-awaited consultation on the Green Deal.

The key prediction that the government made is the rather clunky one that, by 2020, green energy measures will, on average, lead to a £94 (or 7%) reduction in household energy bills compared to what they would have paid in the absence of policies. Policy measures will, the government say, add £280 to bills; but they also say that bills will fall by £373 as energy efficiency measures reduce overall consumption and bring down bills. So overall, the argument goes, £94 less.

This information was delivered in something of a PR blitz, with full spectrum press release, some nifty graphs, a Q&A, and even an infographic to illustrate the bills-go-up-come-down message:

DECC Household bills

There are various schools of thought on whether the government argument that consumption will fall due to efficiency measures stacks up, with the Daily Mail taking a very straightforward approach - focus on the predicted £280 increase and rubbish the rest of the government's predictions about bills falling. This is hardly unexpected, given the Mail's editorial line. Even more unsurprisingly, Benny Peiser of the Global Warming Policy Foundation is cited (along with the de rigour photo of Peiser - does the Mail have a contract with the GWPF to print this photo every time he is quoted?) - slating the Government's predictions on energy reduction as "not based on any sound economic facts. They are pure guesswork.'

This is a pretty good line to take, given that in June of this year the Mail kicked off its anti green-taxes campaign with a front-page headline and a slew of follow up stories based on an estimate by the GWPF that 'green taxes' are currently adding £200 to consumer bills - a figure that has not been explained or substantiated. The Mail subsequently corrected this figure following a PCC complaint from Carbon Brief; and corrected it again after the Mail on Sunday repeated the figure. The GWPF has never backed it up. But never mind.  

Leaving aside the Mail's sourcing policies, they are not alone in questioning the Government's figures. The BBC reported the story under the headline "Electricity costs to rise due to Government policies", the Telegraph reported that "Households face rising energy bills due to green taxes" and on Newsnight, Chris Huhne defended himself against accusations from Jeremy Paxman on abrasive form that the proposed 7% reduction in energy bills by 2020 were "an entirely bogus statistic".

Amongst all this however (and perhaps this is just because we're feeling optimistic today) there are a few signs that some sanity is returning to the debate. A few key points are emerging and reflected in most of the media coverage:

As outlined by Ofgem a few weeks ago, the Government figures confirm that the blame for recent rises in consumer energy bills lies not with 'green taxes', but with rising gas prices. According to the new documents released yesterday, wholesale gas and electricity costs represent around £600 (48%) of an average household energy bill; and the wholesale prices of gas this winter is around 38% higher than last winter. This is now something that is being featured in coverage of the issue across the board, from the Mail to the BBC.

The Government estimates that energy and climate change policies currently make up around 7% (£89) of the average household energy bill - or more specifically, 4% of gas bills and 10% of electricity bills. Some Government policies are intended to help householders save energy (including for example the Community Energy Saving Programme and the Carbon Emissions Reductions Target) - thus reducing their bills. Once these are taken into account, DECC estimates that in 2011, energy and climate change policies are adding £19, or just 2% to the average household energy bill.

Predicting energy prices is a difficult task which has a tendency to blow up in your face. But there seem to be strong reasons to think that energy bills are going to go up whatever happens. Huhne stated unequivocally yesterday that "Overall, we anticipate that rising world gas prices will push up bills." Advocates for shale gas like Dieter Helm claim it will push down prices in this country, but they are at odds with others, including the UK Parliamentary Committee and DeutscheBank.

The Government's predictions on falling energy bills are dependent on a high take-up of energy efficiency measures - the Government's 'Green Deal'. According to the Mail, the government figures will work out only if electricity use by households is cut by a third by 2020. Commentators on all sides of the debate remain sceptical about whether the energy efficiency measures proposed will really deliver that. As USwitch said in the Mail, "'If take-up is lower than expected, energy bills will be pushed up even further".

For anyone who wants a fairly reasonable assessment of some of the key issues, take a look at last night's Newsnight - which includes a thirty minute segment on energy bills, with voices from all side.

Only one point seems to have slipped out of the debate - no-one, anywhere, mentions climate change.

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