EXCLUSIVE by Scottish Energy News Correspondent
The cost of funding government environmental levies will continue to rise according to the Office for Budget Responsibility (OBR).
Programmes such as the Renewables Obligation, Contracts for Difference and Feed in Tariffs cost a total of £3.1bn in the year 2013-14, adding roughly £89 to the typical customer’s annual energy bill.
However, according to the OBR’s projections this will increase to £9.4bn by 2019-20 – more than doubling the impact on consumers and pushing the annual cost north of £220 per customer.
Dr. Richard Westoby, Director of Retail Economics at Perth-based utility giant SSE, said: “We completely support the intention that these levies have.
“The energy industry faces major challenges. The task of ensuring security of supply while cutting carbon emissions and keeping bills affordable for the consumer is no easy feat.
“Schemes like the Renewables Obligation and Contracts for Difference help the industry hit environmental targets while keeping the lights on and the Warm Home Discount give vital financial support to those customers who really need it.
“However, the way in which these policies are paid for is in need of serious revaluation. At the moment the cost is picked up by all energy bill payers. This means it does not take into account different people’s ability to pay.
“The current system means that vulnerable pensioners and millionaires alike will pay the same amount as each other, regardless of their income.”
Westoby was an Economic Advisor with the Department of Energy and an economist at British Gas before joining the privatised electricity industry in 1989. He added:
“SSE has long argued for government environmental levies to be moved into general taxation. By collecting the required funds through tax receipts these programmes can be financed in a fair and sustainable way for all concerned. This will cut bills for all customers and make sure that only those that can pay will pay.
“Policy costs have a greater impact on electricity bills than gas bills, meaning that customers with electric heating are disproportionately affected. This has the direct effect of charging customers who are not on the gas grid more.
“It is also concerning that adding more levies to electricity bills could have the unintended consequence of inhibiting the electrification of heat and transport. Moving towards a greater amount of electric heat as opposed to gas heat is seen as an important step towards securing energy security and reducing emissions.
“However, as customers are taken off the gas grid the amount they will pay in government levies will increase. This problem is only going to get worse if the OBR projections are correct. “