SSE chief questions green energy policy

SSE says homeowners will see their power bills rise as a result of green energy tax policies. Picture: PA

Alistair Phillips-Davies, the chief executive of SSE, has queried whether ministers should be thinking more about price hikes facing consumers than the introduction of green levies.

SSE says homeowners will see their power bills rise by £26 a year as a result of green energy tax policies.

Last week, the company found itself at the centre of a row after announcing an inflation-busting rise in bills. It said the government’s green levies were part of the reason prices had to go up.

Mr Phillips-Davies said: “A price rise is never a good thing to do, but if it focuses everybody on a debate about what we as a nation should be spending money on, then in one way it will be helpful. We need to think about what people really want to pay for; maybe it is time to retreat from decarbonisation and focus more on the cost of living.”

Coal and gas plants have to pay a levy under the “carbon price floor” policy, introduced by Chancellor George Osborne last April, and are allowed to pass on the additional costs to customers in the form of higher bills.

It aims to encourage energy companies to produce less CO2 emissions when they generate power and is seen as a key green measure by the government.

The cost to energy firms is set to rise from £4.94 per tonne of CO2 this year to £9.55 in 2014-15 and £18.08 in 2015-16. According to SSE, this will increase bills by an average of £7.17 this year, £13.87 next year and £26.25 the following year.

A source at SSE also warned of increases of more than £50 a year because of the way the carbon tax is being accelerated.

Uswitch.com, the comparison service website, has called on the UK government to take on the financial burden of the carbon tax to prevent homeowners being forced to pay higher bills. It claims some could be forced to cut their energy consumption as a result of the higher cost of heating their homes.

Spiralling energy bills have been at the heart of a cost-of-living debate in the UK, after Labour leader Ed Miliband promised a 20-month price freeze should his party win power in May 2015. In response, energy companies warned that would stop vital investment and could lead to blackouts.

Shadow energy secretary Tom Greatrex said SSE and other energy companies were using green measures as “a diversionary tactic” but added that the carbon tax and the decision to accelerate it was more about raising revenue for the Treasury than introducing green policies.

He said: “SSE ignore three vital points when they make these claims about green measures.

“First, most of the extra money is used to help pensioners and poorer people with their energy. Also, a lot of the money going to invest in renewable energy is going to SSE.

“And this argument does nothing to tackle the lack of transparency in pricing by the energy companies, which Labour and consumers want to see. We have plans to bring in policies to make this happen.”

But he added: “The carbon price floor was somewhat ironically introduced by George Osborne, who is supposedly against green measures, and it was he who chose to accelerate it.

“It is much higher than the equivalent in the rest of Europe, which uses the emission trading scheme, and we need to bring the UK level more in line with that.

“Essentially, at the moment it is a cash cow for the Treasury.”

Consumer groups agreed that while companies like SSE had to be “more transparent”, carbon taxes were “making the burden heavier” on consumers.

Ann Robinson, director of consumer policy at uSwitch.com, said: “Affordability has been an issue for some time and we have consistently called for the government to ensure affordability is at the heart of energy policy.

“The fact is that this is becoming a political football, which is not helping consumers who need to know how they are going to pay their bills now and in the future.”

She went on: “There needs to be a balance between moving to greener energy sources and lifting the weight on people’s bills.

“Some 69 per cent of people say that the government has not struck the right balance between ‘greening’ energy supplies and households being able to enjoy affordable energy, and 22 per cent say that affordable energy has to be the priority.”

She warned spiralling prices meant people were going cold in the winter.

She said: “Worryingly, last winter almost seven in ten households went without heating at some point to keep their energy costs down, while over a third said that cutting back on energy usage was affecting their quality of life or health.

“We risk these numbers increasing this winter as a result of price hikes, and many would say that now is not the time to be loading on extra costs for them to swallow.”

Adam Scorer, of Consumer Futures, called on ministers to acknowledge energy policy costs were adding to consumer woes and said it was “only right” to either remove carbon taxes from bills or use the proceeds to make homes more efficient.

He said: “To ensure the energy market is being fair to consumers, it is absolutely vital that SSE, and others who follow, clearly set out why price rises are justified – there needs to be much more transparency in a market that is failing to win anyone’s trust. Switching supplier also needs to be made quicker and simpler so people can get the best deal.”

However, Energy Secretary Ed Davey defended the policy, arguing it raised money for important infrastructure investment in energy. The Lib Dem MP said: “If you look at the big infrastructure investments that are happening now, not at the end of this decade or the next decade, they’re energy.

“We’ve seen £35 billion of investment in the last three years, into Britain’s energy sector. That’s way above any other infrastructure sector.

“If you look at the pipeline, we’re looking at a hundred billion pounds of investment. This is critical, not just to keeping the lights on and to going green; it’s critical for green jobs and our economy and I’m really proud of our record.”

He added: “People have got to understand what these green taxes actually are. Most of them are actually social policies to help the fuel-poor manage their bills. Things like warm home discount, part of the energy company obligation, is targeted on the fuel-poor so I don’t think we want to get rid of those, do we?”

However, manufacturers have also condemned the tax, saying it makes British industry uncompetitive. They say carbon is now more expensive in the UK than in the rest of Europe, where CO2 prices under the EU emissions trading system have fallen to an average €4.60 (£3.90) a tonne.

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