1 Dec 2013

Back to the Future on energy bills?

Dave and Nick have finally announced their energy bill cutting plan but who wins and who loses? Have we gone back to the future?

Dave and Nick have finally announced their energy bill cutting plan in the Sun newspaper but who wins and who loses? Have we gone back to the future? Your energy bill will be an average of £50 lower than it would have been after  u-turns on two key “green” measures to support low income households.  That doesn’t necessarily mean your bill will actually come down – it may just rise by less. But the energy companies are expected to announce a hope of keeping bills down until 2015 at least. I spoke to the Treasury Chief Secretary Danny Alexander today who claims it is all a “win, win”. Can that really be true? 

In 2010 it was this government who decided to make consumers pay through bills for the Energy Companies Obligation (or ECO) to carry out insulation and other efficiency measures on low income homes.

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There was, in Liam Byrne’s immortal words, “no money” to pay for it from general taxation. But ECO refocussed the previous Warm Front scheme to target poorer households. The same went for a scheme of rebates for the fuel-poor called Warm Home Discount. A number of businesses and jobs in the  “Green Economy ” flowed from those schemes and as homes were improved bills in those homes came down. It may have been a virtuous circle but it was an expensive one too.

Months of fury at rising prices and the Labour pledge to freeze bills has prompted the government u-turn. They describe it as listening to people and responding to concerns. So the ECO scheme is being slowed down with the same number of homes due to be improved over a longer period of time – an additional two years.  And the Treasury is going to pay for the Warm Home Discount from general taxation – they say new anti-avoidance measures announced in the Autumn Statement will pay for it.

The energy efficiency industry is very worried about job losses and closures given the massive drop in demand from slowing down ECO.  So the government is introducing new incentives for homebuyers and landlords to have the work carried out themselves. If you buy a home you can apply for £1000 towards energy efficiency measures, and ministers hope that will also improve the dreadful uptake of Green Deal finance, where you can get a loan to improve your home’s energy efficiency. That all means, says Danny Alexander, there need be no drop in the number of homes being improved.

But instead of those benefiting being primarily the less well off (through ECO) it might well be the better off who are able to take advantage of the insulation incentives. That is exactly what the government wanted to put an end to when it introduced ECO in the first place.