By Richard Johnstone | 2 December 2013
Energy Secretary Ed Davey has today set out plans to move some government-mandated green levies on fuel bills into general taxation in a bid to limit the price rises being faced by consumers.
Ahead of the Autumn Statement on Thursday, Davey announced that the element of energy bills that pays for the Energy Company Obligation, a nationwide home insulation programme, would be reduced by around £30-£35 a year. In addition, the levy on all bills to pay for the Warm Homes Discount for poorest households would be reduced by £12 annually.
Davey said this action was being taken as energy bills were a big concern for people, with many firms having announced price increases in recent months.
‘Today’s announcement confirms a serious, workable package which would save households around £50 on average,’ he said.
The rebate on the Warm Homes Discount will be paid by government from taxation, and will cost around £600m, while ECO’s regulations have been altered to reflect the reduction in funding. Energy companies will now be able to include insulation of easy-to-treat cavity walls and lofts as part of their ECO carbon targets. These cheaper improvements had not been previously included.
However, Davey insisted the changes did not mean that the energy firms had been freed from obligations to help people who face fuel poverty.
‘Today’s package also ensures that energy companies are not off the hook. They will keep up their efforts to help people in fuel poverty cut their bills by making sure their homes leak less heat, and they will have to be more transparent about what they’re spending on social and environmental measures.’
All major energy suppliers have confirmed that they will pass the benefits of this package to their customers, and industry body Energy UK welcomed the announcement.
A spokesman said: ‘This is a good outcome for consumers. The changes will bring a welcome set of reductions to the policy costs, which are a significant part of the household bill, have been rising and were set to rise further. Costs are spread in a fairer manner and household bills are reduced.
‘The industry will continue to insulate homes. The parts of ECO that target fuel poverty have been increased and the complicated solid wall installation has a more practical timescale and is made less complex.’
However, Labour, which has pledged to legislate for a freeze in energy prices until 2017 if it wins the next election, said bills would still rise overall despite today’s announcement.
Shadow energy secretary Caroline Flint said: ‘Any help is better than none, but you can judge this government by who they’re asking to pick up the tab – the taxpayer. The energy companies have got off scot-free.
‘This shows why nothing less than a price freeze and action to reset the market to stop the energy companies overcharging again in the future will do.’
