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How much is green energy adding to your bills?

£10 notes as wind turbines

MPs have criticised the way energy companies communicate price rises with their customers, causing ‘deep mistrust’. Do you know what’s actually causing your energy bills to go up?

The report by the House of Commons’ Energy and Climate Change Committee added that energy companies were not being as competitive as they ought to be, and also called on the energy regulator Ofgem to ensure bills are made clearer.

The report backs up our findings – less than a quarter of people trust energy companies. The government and Ofgem must do more to rebuild this trust. Ultimately, people won’t feel confident that they’re paying a fair price for energy unless prices are simplified.

It’s also important that we can see exactly what we’re paying for – energy bills must be open, transparent and subject to robust scrutiny.

The cost of moving away from ‘dirty’ energy

This got me to thinking – what is it that’s pushing our energy bills up? By now the debates about profits and global gas price rises are well rehearsed, but I want to throw something else into the mix: the cost of weaning the UK off of carbon-intensive, or environmentally ‘dirty’ if you like, methods of generating electricity.

It’s not that I don’t agree that we need to find cleaner ways of generating electricity, I absolutely think we do, I just think we need to be honest and open about how we’re going to pay for it. The Committee’s report also criticised the levies on bills that fund environmental programmes, adding that it must be clearer as to what their bills are made up of.

Transparency, transparency, transparency

Over the past few years I’ve come to realise that there’s one watchword that needs to be said again and again in the debate about energy prices: transparency. We recently published a report about the challenge of ‘decarbonising’ the UK’s energy sector (PDF). One of the key recommendations was that the cost of this decarbonisation should be subject to the same levels of scrutiny as spending that comes directly from taxation. We want a regular and independent audit of how the money is being spent in the hope that better value for money will be the outcome.

Moreover, it should not be beyond the wit of energy companies to give a detailed breakdown of what we’re paying for on our energy bills. A bit more openness and transparency about what it is we’re paying them for would go some way to fixing the breakdown in trust that customers feel for energy companies.

Energy prices are at the top of the league table of peoples’ financial concerns, so I think we’re entitled to a bit more detail about those prices. Have you ever wondered what makes up your energy bill?

Comments
Member

How about most of our energy companies seem to be owned by foreigners who are ripping us off and making big profits out of us?

Member

How about doing what I did a year or two ago, move to Co-operative Energy. Ethical, and no PLC shareholders except that YOU are then a shareholder! GO4IT.

Member

Steve, they don’t seem cheap. What do you get rebated as a shareholder?

Member

All the major energy suppliers promise to be the cheapest but they have to pay a slice to their PLC shareholders so their customers end up forking out for that. Co-operative Energy don’t make false promises and do look after their mutual customer-shareholders, as described on their website here:- http://www.cooperativeenergy.coop/why-us/

Member

I’m looking for the best deal – annual bill. I don’t see why I should pay more to the Co-op just because they are a mutual, unless they return dividend that make it worthwhile. Although their website claims low carbon energy, as far as I know they don’t invest in energy production so must buy on the open market – if they buy from “sustainable” sources (maybe at extra cost) that reduces what sustainable sources can provide to other suppliers? I’d like to know more about the argument for buying from them.

Member

ofgem publish an energy bill breakdown for an average consumer under 6 categories – http://www.ofgem.gov.uk/Media/FactSheets/Documents1/household-bills.pdf
bewtween 58% and 67% being for fuel (Dec 2012) and 6-11% for environmental charges.
I believe it would be useful if these categories were shown as £ on each consumer’s bill so you could see how your supplier uses its income.
The green energy component comes from government committments and it is questionable how this is best paid for. As it, in principle, benefits everyone then it might be best if it came out of general taxation. However, since this would increase taxes – how popular would that be? – this is avoided by tacking it onto energy bills. Should we all pay in proportion to our bill – domestic, commercial and industrial users alike?
This green component is set to increase substantially. I would like to see how the government is investing this money. I am concerned about poor sources of renewable energy being heavily subsidised – on-shore wind farms, solar power, feed in tariffs. I would prefer to see research into potentially more reliable sources being looked at more urgently – e.g. tidal flow, tidal storage and possibly wave power, a huge resource that surrounds us and could provide a substantial part of our future electricity needs. We will always need gas, and its future seems much more assured now than it was.

Member

I agree wholeheartedly with the sentiment that we need to see what renewable energy is being paid for. This country has a bizarre schizophrenia towards energy.The debate on fracking is a perfect illustration. We don’t want high prices and we don’t want new technology to provide cheaper energy! Doh!
The Severn barrage project is being treated like the Channel Tunnel. Must be private but why? We have a fantastic natural resource that is not being properly pursued

Member
retired says:
1 August 2013

I’m not convinced about the ‘global warming effect’ either – we could be paying out all this extra money for nothing. A relative of mine who is a scientist is not convinced – I trust his judgement rather than the government!