Telegraph muddle the numbers on electricity bills
- 10 May 2012, 17:14
- Robin Webster & Chris Peters
The
Daily Telegraph appear to be getting its spin on the
government's upcoming Energy Bill in early. But in suggesting that
the government are predicting a £200 rise in electricity bills as a
result of "new subsidies" for low-carbon energy, it appears to have
read the figures wrong.
A £200 rise in electricity bills?
The Telegraph's
online piece on the Energy Bill announcement, published
yesterday, is headlined "Queen's Speech 2012: energy laws will send
bills soaring". A shorter version appears on p.5 of today's paper,
headlined "£200 a year for green power".
The piece suggests that "the new subsidies" introduced as part
of the government's electricity market reforms will add around £200
to consumer electricity bills "over the next 15 years":
Government estimates suggest the new
subsidies will put an extra £205 a year on the average household
electricity bill over the next 15 years.
It has predicted domestic electricity figures will rise from £477
per year to £682 per year by 2026.
These numbers - £477 and £682 - appear to come from an
impact assessment report produced by the Department of Energy
and Climate Change (DECC) in December 2010. It's worth noting that
this consultation document has been followed by a full
EMR white paper and so these figures are fairly old now, and
have since been updated.
Here's the table in question:
Source: Electricity Market Reform - options for ensuring
electricity security of supply and promoting investment in
low-carbon generation. Impact assessment. p.92
The Telegraph article compares two figures from the 'baseline
average' column to calculate a £200 rise in electricity bills
between the periods 2011-2015 and 2026-2030
But these 'baseline averages' are not figures showing how bills
will rise because of new policies. In fact, these 'baseline
average' figures are DECC's estimate of what bills will do if
measures contained in the Energy Bill are not introduced.
DECC told us that
The baseline average refers to the
electricity bill including continuing with the Renewables
Obligation (and other energy and climate change policies), but does
not include EMR. The reason is that we are looking at the impact
that EMR has on bills and therefore want to compare the Baseline
Bill vs. Bill With EMR.
The increase in the baseline average bill captures globally higher
gas prices leading to higher electricity price, rising network
costs and the impact of climate change and energy policies.
So current energy and climate change policies do account for
some of this 'baseline' £200 increase. But the £200 rise also
includes the impact of higher gas prices and rising costs from the
electricity network. And it specifically excludes the effects of
any of the new policies in an Energy Bill, which are assessed in
the other parts of the table.
The Telegraph appear to have interpreted figures showing how
bills will change if new policies are not
introduced as showing how bills will change if they
are introduced. In other words, the figures show
the opposite of what the article says they do.
So how much do the government think energy bills will
rise by?
As we mentioned, the government has published newer versions of
these figures. So we can at least get an accurate assessment of
DECC's view, seeing as that is what the Telegraph are
discussing.
In the table below, taken from the
newer EMR white paper, DECC argue that, depending on which
policies are adopted, the measures contained in the Energy Bill
will actually reduce household electricity bills:
Source: Planning our electric future: a White Paper for secure,
affordable and low-carbon electricity: p 119 Figure 23.
The latter four columns in the table above represent
different options for the market reform part of the Energy Bill.
They all suggest that although electricity bills will go up overall
between now and 2030, the measures contained in the Energy Bill
will make the rise smaller.
When the white paper was first launched, DECC
put it like this:
The electricity market reform package
will minimise the impact on bills by insulating the UK from
volatile fossil fuel prices and providing investors with the
certainty they need to raise capital more cheaply. Estimates are
that with the market left as it is now, domestic electricity bills
will be around £200 higher in 2030 compared with today's average
annual household bill (about £500). The market reform packages
published today limit this increase to £160 - £40 lower than it
would otherwise be.
Of course, DECC's predictions are open to being challenged and
may not be right - but their assessment is clearly that with the
EMR measures contained in the Energy Bill in place, household
electricity bills will be £40 lower in 2030 than otherwise.
The Climate Change Committee's numbers
The article also references the Committee on Climate Change's
views - the
online version of the article contains the line:
The independent Committee on Climate
Change says bills are likely to rise by £200 by the end of this
decade, with half of this due to current green policies.
Indeed, the
Climate Change Committee (CCC) report, released in December
2011, does predict something which resembles the Telegraph's
interpretation:
...the electricity bill would increase
by £180 (42%) over the next decade, from £430 per household in 2010
to £610 in 2020. Of this change, just over £70 would be due to
changes in wholesale, transmission and distribution costs, around
£100 due to costs of supporting low-carbon investments and around
£10 due to costs relating to energy efficiency measures.
It's worth noting that this doesn't support the headline either
- the assessment is for 2020, not 2030, and the CCC explicitly say
only £100 of such a rise would be related to "low-carbon
investments." To get this figure, you also have to ignore the other
part of what the CCC say, which is that rather than rising, bills
could fall by £10 over the period if policies to encourage energy
efficiency are successfully introduced.
None of this has anything to do with the Energy Bill itself, as
far as we can see.
So that's all as clear as mud - and it's probably just the first
salvo. DECC told us that "We will also be publishing our latest
estimates [of impacts of policies on energy bills] towards the end
of this month with the Draft Energy Bill."
According to
some reports, the electricity market reforms will be laid out
for publication on 22nd May, so expect another round of media
coverage then.