Green deal and Eco will reduce bills by 2020

Most companies providing essential services to UK households will come under pressure to explain their price rises. And SSE, formerly Scottish and Southern Energy, is no exception. Its managing director of retail, Will Morris, tried to justify its 8.2% average price rise on Thursday:

We’ve done as much as we could to keep prices down, but the reality is that buying wholesale energy in global markets, delivering it to customers’ homes, and government-imposed levies collected through bills – endorsed by all the major parties – all cost more than they did last year.

Such a list does not really explain the 8.2% rise unless you know which components are rising by what amount, something that 4.4 million electricity customers and 2.9 million households will want to know.

Imagine energy prices as grades in school. When average grades rise by 8.2% the school heaps praise on teachers, pupil attendance and computers, which is slightly meaningless unless you know what is happening to each factor. For example, the average grade rise may be down to 2% more teachers, a 30% rise in attendance and a 1.4% drop in the number of computers.

Many commentators have been quick to point to “government levies” (the so-called “green taxes”) as the main reason for the energy price rise. After all, they have risen by 13%. Do “green taxes” affect energy prices’? Not really

For starters, of an average household energy bill, the “green” bit represents just £112 of around £1,267 – or 8.8%. And there’s much more to “green taxes” than first appears. For starters, 52% of green subsidies involve rules on keeping people warm, while 29% of the levies concerns renewables, i.e. investments in forms of energy less environmentally costly – an attempt to prevent huge future price rises by paying a smaller price rise now.

The government estimates the impact of that ‘green tax’ like this: without it, by 2020 prices will rise by 18% – with it, prices will rise by 5%.

So should ‘green taxes’ really be the focus of frustration about rising energy bills. Probably not.

Taxing work
Public data can even go a step further than claiming that ‘green taxes’ will save money in the future: they’d say that they’re already saving money now. An analysis by the Department of Energy & Climate Change published earlier this year suggested that “today’s householders are paying on average £64 or 5% less for their gas and electricity bills as a result of energy and climate change policies than if no policies had existed”. There analysis of impact on household bills with and without climate change policies is shown in the image below.

There’s another question that is worth raising here: should these ‘green taxes’ just be included as part of general taxation? If they were, politicians would be able to claim that energy bills would drop by £112 with immediate effect and energy companies wouldn’t be able to hide behind the levies as justification for raising their prices.

What do you think about rising energy prices? Do you think the government has got their numbers right? Share your views below.

*content taken from guardian.co.uk and is used as a reference only, gaininggreen have not contributed to any of the content in this article and is used for the purposes of reader education.