Do you know what your energy bills pay for?

British Gas’s announcement makes a big play of what it’s doing to help its customers in these tough times. For example, the 400,000 British Gas customers who received a £130 rebate on their energy bill through the Warm Home Discount, and the 700,000 insulation installations it completed in 2012. All sounds very generous, doesn’t it?

Only it isn’t in the grand scheme of things. All of the major energy suppliers are required by the government to give that £130 back to vulnerable consumers (those over 80 or those in receipt of pension credits) as a way of helping them deal with rising energy costs.

Energy company obligations

And how about the 700,000 insulation jobs British Gas did last year? Well those were carried out under the Carbon Emissions Reduction Target (CERT), another government programme that the big energy companies are obligated to deliver under. I bet you’re wondering who pays for policies like CERT and the Warm Home Discount… Well guess what? It’s you and me.

Each time you pay your energy bill a portion of that payment subsidises that ‘free’ insulation and another portion helps energy companies to give some customers a £130 rebate.

We’ve been campaigning for more openness in how much people pay for these schemes. Up until now it has been very difficult to tell how much of consumers’ gas and electricity bills go towards them. But there is hope.

Asking for openness

Under the government’s new Energy Company Obligation – which replaces CERT and a number of other energy efficiency programmes – we’re hopeful that the reporting of these costs by energy companies will be much more rigorous. This means that it will be far easier to analyse the costs that energy companies pass on to you and me through our bills.

Of course, if our proposal for a single unit price for energy was introduced, then these costs would also be applied on a fairer basis. Rather than being passed on as a fixed charge that is the same for every customer, your contribution to these schemes would be directly linked to the amount of energy you use.

There’s nothing wrong with people paying a little extra on their energy bills to help others with some free insulation, especially vulnerable customers. But it is important that we know how much money is added to bills and whether the way it is spent represents value for money. And as well as being more open about how companies spend the money, they should also be clearer about why they’re spending it.