The Government has confirmed its much-leaked-in-advance plans to cut UK household energy bills, with a package of measures that will save consumers on average £50 a year and give householders £1,000 to spend on energy saving measures when they move home.
Measures to reduce the current cost of levies include:
- Establishing a rebate saving the average customer £12 on their bill, for the next two years, worth a total of £600 million.
- The Warm Homes Discount will continue to help millions of vulnerable households receive a £135 rebate off their energy bill.
- Reducing the cost of the Energy Company Obligation (ECO), an insulation scheme delivered by major energy suppliers. This will result in £30-£35 off bills, on average, next year.
- The existing dedicated support in ECO for low income and vulnerable households will be maintained and extended from March 2015 until March 2017.
As a quid pro quo, electricity distribution network companies have confirmed they willing to take voluntary action to reduce network costs in 2014/15. This would allow a further one-off reduction of an average of around £5 on electricity bills, which energy suppliers will be able to pass on to their customers as well.
UK Energy Minister Ed Davey, said: “All of the major energy suppliers have confirmed that they will pass the benefits of this package to their customers. The reduction in individual household bills will depend on the energy supplier:
“Some companies have not yet announced price rises for 2014, or have limited their rise until the Government’s review of green levies concluded. Others have announced price rises and have indicated that they will reduce their customers’ bills as a result of these changes.”
“The value of the benefit will vary between companies, but, on average, this package, including VAT, will be worth £50 to households, compared to what would have happened without these changes.”
Different measures will apply to N. Ireland.
Help for landlords to improve energy efficiency
The Government will also ensure that its overall approach is carbon neutral, with new measures that will boost energy efficiency even further by introducing new schemes for home-movers, landlords and public sector buildings, worth £540 million over three years:
- In future, when people buy a new home, they could get up to £1000 from the Government to spend on important energy-saving measures – equivalent to half the stamp duty on the average house – or up to £4000 for particularly expensive measures.
- The scheme will be available to all people moving house including those who don’t pay stamp duty, helping around 60,000 homes a year, over three years.
- Government will also introduce a scheme to support private landlords in improving the energy efficiency of their properties, which will improve around 15,000 of the least energy efficient rental properties each year for three years. Together, the homebuyers and private rental schemes will be worth £450 million over three years.
- £90 million over three years will be spent improving the energy efficiency of schools, hospitals and other public sector buildings.
- Measures to prevent fraud, particularly around loft and easy-to-treat cavity wall insulation, will be introduced and standardised across the industry.
The Government will also increase the funds available to local authorities this year through Green Deal Communities from £20 million to £80 million, to help support ‘street-by-street’ programmes for hard-to-treat homes in a cost-effective way, and will keep the Green Deal cashback scheme open, which will protect jobs in the energy efficiency industry before the new measures take effect.
In order to provide investor certainty at a time when the UK needs unprecedented investment in energy security, levies providing support for existing low carbon energy projects will not change, such as the Renewables Obligation (RO), Contracts for Difference (CfDs) and feed in tariffs (FITs).
Davey added; “Without this investment, energy security would be jeopardised as Britain would become ever more dependent on imported oil and gas, and energy bills in the future would be increasingly subject to high and volatile fossil fuel prices.”
In response to the Government’s proposals, a spokesman for Energy UK – the trade association which represents electricity generators and suppliers, including the ‘Big Six’ – said: “This is a good outcome for consumers.
“These changes will bring a welcome set of reductions to the policy costs which are a significant part of the household bill, have been rising and were set to rise further. Costs are spread in a fairer manner and household bills are reduced.
“The industry will continue to insulate homes. The parts of ECO that target fuel poverty have been increased and the complicated solid wall installation has a more practical timescale and is made less complex.
“Companies will be making their own announcements individually about what it means for their customers.”