Household energy bill increases caused primarily by rising cost of gas, not environmental policies

A report out this morning from The Committee on Climate Change suggests that evidence suggests that recent bill increases are not due to environmental policy costs but instead are primarily due to increased wholesale gas costs.

The report found that up to 2020,policies to achieve a low-carbon economy will add
around £110 to bills, with scope to offset this if energy efficiency can be improved.

The Committee’s analysis focuses on the 84% of UK households (21 million) that
have dual-fuel energy bills that is that they use gas for heating rather than electricity or other fuels.

For these households, energy bills increased from around £605 per household in
2004 to £1,060 in 2010

Of this increase, around £380 (84%) was unrelated to low-carbon measures, with £290 due to increases in the wholesale costs reflecting increases in the price of gas and supplier costs, £70 due to increasing transmission and distribution costs, and £20 due to VAT.

Around £75 (16%) was due to policies that reduce carbon emissions, including £30 to support investment in lowcarbon power generation, and £45 for funding energy efficiency improvements in homes.

Lord Adair Turner, Chair of the Committee on Climate Change said:

“We were keen to provide a dispassionate analysis of household bill impacts in what has become a politically controversial area. We found that bills have increased primarily in response to increased wholesale gas costs and not due to environmental policies. Over the next decade, we anticipate a rise of around £100 in the average bill as a result of investment in low-carbon power capacity, which will benefit the UK in the long run. And if we introduce new polices to stimulate energy efficiency improvement then bills in 2020 could broadly be contained at current levels.”