UK Energy Secretary defends government record on energy costs

Posted at December 18, 2012 » By : » Categories : News » Comments Off on UK Energy Secretary defends government record on energy costs

UK Energy Secretary Ed Davey defended the government’s position on energy yesterday, arguing that its climate change policies only account for a small fraction of the typical household fuel bill.

In a speech to the Fair Energy Summit, Davey said government policies only account for 7% of the average household energy bill and laid the blame for rising energy costs firmly at the door of wholesale energy – and in particular gas – prices.

But he said that the government doesn’t want to add “a single penny” to bills that “isn’t in the public interest”.

“The bulk of the cost we add to bills is for supporting low-carbon technologies.  That’s essential for environmental reasons – and I make no apology for ensuring that we will meet our legally binding carbon budgets and renewable targets,” Davey added.

And energy bills could be higher still in the future if the government does nothing to decarbonise the power sector, he warned.

Davey defended the government’s forthcoming Energy Company Obligation (ECO), which will come into force in January requiring energy companies to help their low-income and most vulnerable customers improve their homes, reduce their energy use and pay their bills.

He said there was “no good basis” for claims by energy companies that ECO will increase bills.

“We estimate the overall cost of ECO at an average of £1.3 billion per year – that’s the same as the current supplier obligations, which are now coming to an end.  So ECO should impose no new costs,” he stated.

But a report out yesterday from the Institute for Public Policy Research (IPPR) questioned the government’s record on estimating costs, suggesting that those associated with ECO could be much lower or higher than anticipated.

Again, Davey blamed energy companies themselves for the uncertainty, saying that they have not given the government a clear picture of how much they were spending on previous obligations.

“Once ECO is underway, we will be better able to monitor and review costs, understand if they do appear to be higher than anticipated, and consider what we can do to mitigate that if necessary,” he added.

But Davey’s comments come as Ofgem announced an additional £12 a year for the next eight years on household bills to cover the costs of electricity and gas network upgrades.

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Related stories:
UK energy regulator announces major electricity and gas upgrade (18-Dec)
UK government’s ECO scheme will benefit few, warns report (17-Dec)
Renewables subsidies costing UK households £4, says REA (24-Oct)
UK environmental policies are not the cause of rising energy bills, says CCC (15-Dec 2011)

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