Consumers will be hit with higher bills because officials “significantly
underestimated” the cost of green energy schemes, the Commons spending
watchdog has found.
As a result of the failings in Whitehall, the costs are likely to add
around £110 to the typical household’s annual energy bill in 2020, £17 more
than expected.
The Commons Public Accounts Committee (PAC) found the Government’s
management of the levy control framework, which is supposed to cap the cost
of the schemes, suffered from “a lack of transparency, rigour and
accountability”.
The cross-party panel said the problems with forecasting the cost of the
schemes were the result of “a culture of optimism bias” in the Department
for Business, Energy and Industrial Strategy, which took over from the old
Department for Energy and Climate Change.
The framework sets yearly caps on the forecast costs of the renewables
obligation, feed-in tariffs, and contracts for difference – schemes funded
through levies on energy companies and ultimately paid for by consumers in
their energy bills.
The committee’s Labour chairwoman Meg Hillier said: “Bill-payers deserve to
know whether or not the energy schemes they fund represent good value.
“The Government has failed to meet its commitment to report annually on the
impact these policies are having on bills. Current arrangements just aren’t
good enough.
“At the same time, the Government expects the cost of levies to continue to
bust the budget, meaning customers will pay more than expected.
“This is a result of poor forecasting and further evidence of excessive
optimism in the implementation of energy policy.
“Government must take action to address this and also ensure customers can
see clearly what they are paying towards existing and future schemes
through their bills.”
A National Audit Office report in October found that the £7.6 billion cap
on subsidies for low-carbon electricity set by the Government for 2020/21
will be breached by more than £1 billion by the end of the decade.
The PAC found officials “failed to prepare properly” for the possibility
that forecasts were wrong and the Treasury had not provided sufficient
oversight.
A review of the framework being conducted by the Government needs to take
action to avoid it becoming “increasingly ineffective at controlling costs
to consumers” and support investor confidence, the MPs said.
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