Did British Gas really ignore gas when talking about energy bills?

  • 24 Feb 2012, 14:26
  • Christian Hunt

British Gas told the Sun's City desk today that "government eco charges" are to blame for rising bills. But which bills does it mean?

The Sun writes:

Chief executive Sam Laidlaw said Government eco charges and taxes now account for 15 PER CENT of every home's power bills.

Some media outlets have made much of incorrect claims about the impact of green costs on energy bills, but Laidlaw's comments here are accurate - albeit with one rather important caveat.

Which is: Mr Laidlaw refers to 'power' bills. In energy geek world, this means electricity bills, rather than the combined electricity and gas bills which most people pay.

The effect of green policies on a combined electricity and gas bill is significantly less than 15% - it's around 7%, according to DECC.

Confusing energy bills with electricity bills produces headlines like the one we fact-checked in the Mail earlier in the week, which incorrectly stated that 15% of an entire energy bill is made up of green costs. It meant 15% of electricity prices.

According to figures from parent company Centrica, gas accounts for about 54% of an average British Gas customer's bill. In the context of a discussion about costs to consumers, talking about electricity alone seems quite odd - only 1 in 10 households rely solely on electricity for their energy needs.

We suspect that the distinction between 'power' and 'energy' will probably pass most readers by, and the result of that will be for plenty of people to take away the suggestion that 15% of energy bills are made up of green costs - that's how we read it first time round.

We don't know whether it was Laidlaw or the Sun who chose to focus on 'power', but the end result is an article which, while technically accurate, is weirdly also probably misleading.

In more technical documents, Centrica appear to accept that overall about 7% of an energy bill is made up of 'social and environmental costs', as the government label them.

Their preliminary results released yesterday state that 19% of a British Gas electricity bill and 10% of a gas bill is made up of "Government obligations and taxes inc. green levies and social support" (p.30). Their press office confirmed that this is an aggregate figure which includes VAT at 5%, so knock that off and you basically have the DECC numbers.

It's worth noting that although British Gas lay the blame for rising bills on "eco tax", the Sun notes that a major component of higher bills is that their gas rates went up by 18% last year. Why was this? As we have noted before, it's largely due to the rising price of wholesale gas, with Ofgem recently saying:

Higher gas prices have been the main driver of increasing energy bills over the last eight years.

Finally, Mr Laidlaw apparently warned that

"environmental costs could DOUBLE to £160 per household per year by 2015."

As we have noted in the past, statements about future costs are difficult to unpack, unless you have information about the assumptions. Centrica said that this was based on internal calculations, and that it would send us more information. We'll update the blog when it does.

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