The big six energy companies have been accused of misleading the public by
­blaming green charges for rising gas and electricity bills.

In fact, a Westminster government report argues that green charges have cut
£64 from today’s bills and will cut £166 from bills in 2020.

Critics say the real cause of rising energy is the increasing cost of
fossil fuels – particularly gas.

They point to a UK Government analysis showing that charges for insulating
homes and supporting renewables make up only 9% of the average household
energy bill. The cost of buying electricity and gas on the wholesale market
accounts for nearly half the bill.

The energy companies highlighted green charges as one of the reasons for
introducing price increases averaging 8% in the last few weeks. This
prompted Prime Minister David Cameron to promise a “roll back” of green
charges, and speculation that the Chancellor, George Osborne, will cut them
in his autumn financial statement on December 5.

However, an analysis by the Westminster Department of Energy and Climate
Change (DECC) shows that only £112 of the annual average household energy
bill of £1267 is due to so-called green charges. These include £47 to help
low-income households insulate their homes, £30 to support wind and other
renewable energy sources and £11 for warm home discounts for pensioners.

By far the biggest portion of the bill – £597 – comes from the cost of
buying wholesale energy to distribute to customers. Then there’s £257 to
pay for the distribution networks, £240 to cover supply costs and profits
and £60 for value added tax.

The DECC also argues that the green charges help keep energy prices down.
Today’s bills are £64 lower than they would have been without green
measures, it says, and bills in 2020 will be £166 lower.

“Most of the big six just couldn’t wait to slag off the money that goes to
insulating people’s homes and making our electricity supply secure for the
future by turning it green,” said Dr Richard Dixon, director of Friends of
the Earth Scotland.

“In reality this is a small part of people’s bills and the bit that is
actually going help keep bills down. It is rising fossil fuel prices, the
massive subsidy for new nuclear power and the big companies’ profits we
should be scrutinising.”

Norman Kerr, director of the fuel poverty campaign group Energy Action
Scotland, accused the big six of giving people a “narrow view”. “It is
unhelpful to the debate that the energy companies are placing so much value
on a relatively small part of the bill,” he said. “While they talk about
removing the environmental levies from bills to reduce the costs to
consumers, what everyone forgets is that there will then no longer be any
source of help for fuel poor and vulnerable consumers to reduce their
energy demand.”

Kerr warned that the short-term saving of cutting green charges could cause
the “pain of rising bills” in years to come. “The government must not bow
down to the enormous pressure being placed on them by the energy suppliers
without having an alternative means of providing support to all vulnerable
customers,” he told the Sunday Herald.

“What we really need to reduce consumers’ bills is a radical overhaul of
the wholesale market, which accounts for more than 45% of bills – not
tinkering around the edges.”

Energy companies defended their position. “We prominently set out all of
the individual cost pressures that led to us making the difficult decision
to increase our prices,” said a spokesman for ScottishPower. “Primarily
this was driven by rises in forward wholesale energy costs, increased
energy delivery charges and increased costs to support compulsory social
and environmental schemes.”

According to the company, the main contributory factors to its £98 increase
in annual bills were the cost of energy (£34), transportation (£26) and
environmental and social charges (£20).

Scottish and Southern Energy (SSE) stressed that it had been very clear in
its announcements. “While government social and environmental scheme costs
have risen by 13%, they only account for around 10% of a typical bill and
there are other upward cost pressures underpinning the price increase,”
said an SSE spokesman.

“The costs of buying wholesale energy and transporting it have also gone up
and all three factors together have contributed to the £115 million loss we
have just reported in our energy supply business.”

SSE supported the aims of green charges, the spokesman said, adding: “The
question we have raised is whether they are being paid for in the fairest
possible way. Moving them out of energy bills and into general taxation
would be much more progressive as more of the costs would be shouldered by
those who can better afford to pay.”

While this has its attractions, critics say it would have the major
drawback of making green charges vulnerable to a tax-cutting chancellor.
They also hark back to the rising costs of exploiting fossil fuels.

“There has been a lot of confusion and mixed messages about the drivers of
rising energy bills,” said Lang Banks, director of WWF Scotland. “The
rising wholesale cost of gas – up 240% over a decade according to Ofgem –
is by far the biggest driver of increased bills.”

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