“British energy consumers will on average be better off in 2020 thanks to our low carbon policies. Yes, I said better off.”
Chris Huhne, 20 September 2011
Cathy Newman checks it out
Is Chris Huhne’s middle name Pollyanna? First he tells hard-up families soaring energy prices aren’t such a problem, and that people could afford a £300 mini-break if they could only be bothered to shop around for their gas and electicity bills. Today he optimistically claims householders will be better off in less than a decade because of the coalition government’s energy policies. Really? Chris Huhne is never short of a soundbite, but has he bitten off more than he can chew on this occasion?
The Energy Secretary hit the headlines this week with a promise to crack down on unscrupulous fuel suppliers.
Mr Huhne used his keynote speech at the Lib Dem party conference to unveil plans to fine energy companies for “bad behaviour” and force the big players to offer more competitive fuel bills.
He also said the average consumer would be “better off” by the end of the decade thanks to a raft of policies designed to push renewable energy and “cleaner” sources of power like nuclear and carbon capture and storage, reducing Britain’s dependency on oil and gas.
That’s a claim that immediately set alarm bells ringing at FactCheck Towers.
The latest predictions published by the Department of Energy and Climate Change show that, far from being better off than we are now, we can expect to see our fuel bills rise significantly by 2020.
The estimated average domestic energy bill is expected to be about 16 per cent higher in 2020 than 2010, according to DECC research made public last summer.
That’s hardly surprising given that we will still rely on oil and gas for most of our fuel needs by the end of the decade, and the wholesale price of fossil fuels is expected to spiral upward.
So let’s assume that what Mr Huhne means is that we’ll better off as the result of the Government’s low-carbon policy than we would have been otherwise.
But even that’s not true, according to his own department’s current figures.
They show that the average annual household bill would have reached £1,226 without the green policies, and will hit £1,239 with the policies in place.
That’s an increase of 1 per cent or £13.
It gets worse if you run a business. For an “average medium-seized non-domestic user” the projected annual bill is £368,000 or 26 per cent higher in 2020 than it would have been if ministers had abandoned the low-carbon drive.
FactCheck called DECC and they told us Mr Huhne’s claim was backed by newer research carried out by the department.
Some of the key assumptions like fuel costs have been revised to show a slightly more optimistic scenario where the consumer is expected to make a slight saving thanks to the Government’s various initiatives.
It’s not clear whether that just means that the 1 per cent increase for domestic consumers has been cancelled out or whether businesses can expected to do better too – a tall order considering the size of that 26 per cent difference.
The department says the new figures haven’t been published yet and, while Mr Huhne is happy to use them in his speech they can’t let us see them for FactChecking purposes.
The updated predictions should emerge “this autumn”, according to a spokesman.
Until DECC make their latest research public Mr Huhne is wrong.
And even if new figures do predict a slight decrease in the average fuel bill by 2020, it’s important to remember that all Government forecasts are heavily contingent on assumptions about oil and gas prices, which have been known to fluctuate wildly in the past.
In fact, the more fossil fuel prices rise, the better Mr Huhne will look, as his climate change policies will have a slight negative effect on bills.
But since soaring fuel prices will far outweigh the savings made by the Government’s policies, that will be cold comfort for pensioners trying to heat their homes.
DECC researchers assume that oil and gas will cost $80 a barrel and 69p per therm in 2020. If the real cost is as high $150 and 120p respectively, the average domestic bill would be 5 per cent lower than it would otherwise have been without the climate change policies – £1,699 instead of £1,612.
But £1,612 still represents an increase of more than £250 on the annual bill over ten years, thanks to the fact that changes in fossil fuel prices will continue to be the biggest driver of household bills.
Cathy Newman’s verdict
Based on the information currently available to us, the average fuel bill will be more expensive in 2020. If Chris Huhne wants to claim otherwise, he should publish the research he’s keeping up his sleeve – and FactCheck will look again. However, even if the new figures work in the energy secretary’s favour, all forecasts are heavily contingent on assumptions about oil and gas prices, which have been known to fluctuate wildly in the past. As things stand at the moment, far from helping the situation, as Mr Huhne claims, the government’s low-carbon policies will actually add to the burden on householders.