Green tax adds £150 to home energy bill
Row erupts between British Gas and the Government over renewable subsidies
GREEN taxes will cost households almost £150 from next year, British Gas has claimed as it blamed the Government for a significant rise in electricity bills for three million of its customers.
Britain’s biggest supplier announced that from September electricity prices will increase by 12.5 per cent, adding £76 to the typical annual bill.
The company said that the cost of green subsidies levied on bills had created “significant pressures” and suggested that it had no choice but to respond by raising prices.
However the ministers last night hit back and suggested that the price rises were unjustified as it told the regulator, Ofgem, to do more to safeguard vulnerable customers.
Government sources highlighted that next month British Gas is also axing a £15 dual-fuel discount currently enjoyed by 3.1million of customers.
Ministers claimed they have not ruled out imposing an energy price cap, although the measure appeared to have been abandoned after the Tories’ disastrous general election result.
The announcement by British Gas also added to mounting tensions in the Conservative Party over the current push for renewable energy. Michael Gove, the Environment Secretary, has signalled that more wind farms may be needed to power a new generation of electric cars under plans to ban the sale of diesel and petrol vehicles by 2040.
His plans are opposed by some Tory MPS, who accused the Government of punishing hard-working families with green taxes.
Owen Paterson, a Tory MP and former environment secretary, said: “It is the most regressive form of taxation since the Sheriff of Nottingham, transferring money from the least well off to wealthy landowners and businesses. It’s robbing the poor to pay the rich.
“We are getting less and less competitive with countries like America, where lower energy prices mean that whole industries are coming back.
“We are going in the opposite direction. We should have a free market in technology. It would be very much mistaken to continue increasing subsidies to failed forms of renewables like wind.”
British Gas forecast that the cost of the subsidies – used to fund renewable energy sources such as wind and solar – will hit £149 per household next year having risen by two thirds since 2014. The Office for Budget responsibility, the fiscal watchdog, predicts that environmental levies will rise from £4.6 billion in 2015-16 to £13.5billion by 2022.
British Gas also cited distribution costs for the price rise and said the cost of delivering energy to people’s homes will have increased by £25, equivalent to almost a fifth, by 2018.
One senior Tory claimed transmission costs have risen partly due to wind and other renewable energy sources being too far from population centres. Ian Conn, the chief executive of British
Gas’s parent company Centrica, said: “We have seen our wholesale costs fall by about £36 on the typical bill since the beginning of 2014 and that is not the driver. It is transmission and distribution of electricity to the home and government policy costs that are driving our price increase.”
A spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS) said: “We don’t recognise these figures put out by British Gas. A number of independent reports have shown energy policy costs make up a relatively small proportion of household energy bills.”
The spokesman said it had written to Ofgem to ask “what action the regulator intends to take to safeguard customers on the poorest-value tariffs and [about] the future of the standard variable tariff.
“We want to see rapid progress on this commitment and are ruling nothing out,” he said.
British Gas said the price rise is its first since November 2013 and the group pledged to help protect more than 200,000 vulnerable customers with a warm home discount – a £76 credit to offset the tariff increase.
Details of the rise came as Centrica revealed earnings from its consumer bill fell by a quarter in the first half of the year to £381million. The group said it held off from a rise for up to six months longer than some competitors.
Before the general election, Theresa May announced plans for a cap that could save millions of people on stand- ard variable tariffs around £100 a year. However the pledge appears to have been watered down with Ofgem asked to find ways to cut bills for a smaller number of vulnerable households.
Tory MP John Penrose urged the PM to push ahead with a cap. He said: “This is just the latest price hike by Big 6 energy firms which show how badly this market is serving consumers.
“Ofgem has the legal powers to impose a cap, but must cover all 17 million households on the rip-off standard variable tariffs, not just the two million they’re currently planning.”