No need to raise fuel prices, says UK Energy Minister

Ed Davey, MP
Ed Davey, MP

Commenting on the Npower decision to raise average household gas and electricity bills by around 10% – in line with similar increases by British Gas and SSE – Ed Davey, the UK Energy minister said:

“This is another disappointing announcement from a big energy company. Some of the Big 6 seem not to have noticed that they are no longer alone in the market – there are now 15 small suppliers, and some really competitive fixed deals out there.”

In a move that sparked a ‘war of words’ with Npower, the Minister today published ‘the hard figures on the costs energy companies really face in delivering the Energy Company Obligation (ECO) –  so consumers can see what this scheme is really costing energy companies.”

Davey said: “These figures – supplied by the energy companies themselves – show that the costs are in line with previous schemes so there should be no need for any increase to consumer bills due to ECO. These figures show that the costs of ECO so far are very much in line with the Government’s own estimates of around £1.3 billion per year.

“On these estimates, the cost to households should be around £47 on average this year – broadly in line with the costs of previous schemes. This means there should be no need for any increase to consumer bills.”

The ECO costs are historic costs and future costs may go up or down depending on a range of factors. Projected costs are based on scaling up information from the first eight months of the scheme. These are only indicative of the amount energy suppliers are likely to pass through to customers on their bills to fund their compliance with their share of the obligation.

These figures suggest that customers pay an average of around £50 per annum to fund ECO.

But Paul Massara, Chief Executive, RWE npower said: ”ECO costs provide a significant risk to suppliers as they are driven by market influences and not capped. At npower we have previously called for ECO to be capped so as to provide certainty for customers.

“Suppliers will have varying views to the cost which will only fully be realised at the end of the scheme. Currently these views project the cost at up to £1.9bn. Our forward view of the energy market shows that there are three main reasons why customers’ energy bills are rising, these are:

  • Realising the full costs of implementing government schemes and policies. This forward view shows an increase of 31%.
  • The cost of delivering energy to customers’ homes which now stands at approx £314 per dual fuel customer, increasing by 10%, up from £180 in 2007, and
  • The cost of buying wholesale energy – up 3% from this year.

 

For more information:

RWE npower CEO Paul Massara talks about npower’s new bill

 

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed