Cameron told green levies must stay as energy company raises its prices by 8.2% – The Times

Francis Elliott and Tim Webb

Reducing green levies on energy companies to reduce household bills would land the Government in court, David Cameron has been warned.

An inflation-busting price hike yesterday — the first of a number expected from the main energy companies in
the near future — has intensified the political battle over the rising cost of electricity and gas.

The 7.3 million customers of SSE will pay on average an extra 8.2 per cent from next month, pushing up the cost of the company’s annual dual-energy bills by £106 to £1,380. Rival suppliers are expected to follow suit.
Ed Miliband’s pledge to freeze bills for 20 months in the event of a Labour election victory was dismissed by Mr Cameron as a “con” yesterday. The hardening of his language followed a meeting of the Quad, the coalition’s four most senior ministers, to discuss the Government’s response.

The prospect of reducing green taxes — which energy companies claim account for 10 per cent of bills — has been raised by ministers as a way of matching Labour’s claimed saving.

One option is to soften the impact of the Energy Companies Obligation (ECO), which requires the biggest companies to insulate the homes of pensioners and those on low incomes by 2015. Negotiations are underway between the industry and ministers to extend that deadline, a move that could save the average consumer about £10 a year.

However, even this modest measure may be impossible thanks to legislation that requires efforts to reduce the numbers of people defined as being in “fuel poverty”.

The Fuel Poverty Advisory Group (FPAG), the Government’s official adviser, has already written to ministers warning that any moves to water down the scheme, which the industry claims adds £94 a year to household bills, would leave them vulnerable to a judicial review.

Derek Lickorish, the FPAG’s chairman, said: “Our anxiety is that the Treasury wants to take a knife to ECO. Clearly that would be an absolute derogation of the Government’s obligation to do all it reasonably can to eradicate fuel poverty.”

With little room for manoeuvre No 10 is redoubling its efforts to undermine the credibility of Labour’s price-freeze pledge.

Mr Cameron, who has previously called it a gimmick, used notably more aggressive language yesterday. “It’s a con, and it’s a con because he [Mr Miliband] is not in control of the worldwide price of gas and so he can’t guarantee keeping that promise because the gas price could go shooting up, in which case he’d have to break his promise, or the gas price could go shooting down in which case a freeze wouldn’t be as good as what customers would get.”

The Government will also seek to parry claims that it is standing up for the interests of the biggest energy companies by telling them to be more open about their profits and costs and doing more to encourage competition.
Greg Barker, the Energy Minister, is set to carry out a review of regulations to make it easier for smaller operators.
“Ed Miliband’s got a rubbish policy but a good slogan. We’ve got the right policy — and 18 months to get the slogan right,” said a senior source.

Nevertheless it looks likely that pressure for some sort of short-term relief in the Autumn Statement in December will grow with each new price hike.

Ann Robinson, from uswitch.com, the price comparison website, said of the SSE price rise: “This is a crippling blow for consumers, who are still reeling from last winter’s price hike. This will be seen by many as the final nail in the coffin for affordable energy. Of course the danger now is that the other … suppliers will follow suit. This raises the spectre of yet more households forced to cut back on their heating.”

Last night Alistair Phillips-Davies, SSE’s chief executive, said the rise would be “helpful” if it focused the nation on its spending priorities.

“A price rise is never a good thing, but if it focuses everyone on to a debate about what we as a nation should be spending money on, then in one way it will be helpful,” he said. “I doubt the public like price increases of this magnitude but if we carry on firmly behind the green agenda, we will continue to have price increases like this.”
Last night Mr Miliband accused energy companies of being guilty of “predatory behaviour” and said the Government was “frozen in inaction”.