The Prime Minister announced an important new policy today, following on the Chancellor’s outline of it last month. He wishes to cut energy bills by cutting some of the green levies placed on our energy bills by the last government. I am all in favour of this new approach.
So what is there to remove or cut? The following is the list of extra charges on an average combined fuel (gas and electricity) bill, showing there are plenty of targets:
Eco (Energy company obligation to pay for Green Deal) £47
Warm home discount (levy to pay for discounts for vulnerable consumers) £11
Smart meters £3
Renewable obligation £30
Feed In Tariffs (solar subsidy etc) £7
EU ETS (EU’s system for taxing CO2 emissions) £8
Carbon floor price (UK’s system for also taxing CO2 emissions) £5
Total £111 (9%)
There is also £60 of VAT (5%) courtesy of Sir John Major’s government and all subsequent governments
Energy and climate change policies add 14% to an average electricity bill, and 5% to a gas bill. Last year the large energy firms received £900m in wind subsidies, paid for by consumers.
What could they cut? The domestic subsidy regimes for particular programmes could be removed. The EU ones would be more difficult to budge, though taking the issue to the EU for change would be worthwhile doing. The government will probably not want to remove the better purposes of domestic schemes to help poorer consumers and to promote better insulation. In these cases they might transfer some of the cost to general taxation.
The way to achieve cheaper power, as explained before on this site, is to reopen closed mothballed older power stations, keep open the remaining lower cost older stations, and to generate more power from them at the expense of renewables. The subsidies for future additional renewable power should be reduced sharply or removed if you wish to cut future bills.
If the government does not change the mix of its current and future electricity generation, it will have limited scope in the years ahead to lower the cost, given the trend to rely more and more on on dear forms of energy, and the need to continue subsidies promised to those who have provided these dearer forms of energy supply.
October 23, 2013
I did say some weeks ago, that if David Cameron turned on the ‘green tax’ lobby, commentators would jump on him shouting ‘U-turn’. In fact, it took Andrew Neil less than five minutes to do just that on today’s Daily Politics Show with others following suit.
Mr Cameron’s defence should be, to deal with the immediate problem of high energy costs first, that are having such a devastating effect on people and business, then develop an energy policy that reduces CO2 and carbon emissions, and tackles climate change in an affordable way, if indeed it exists at all.
Even the most blinkered liberal leftie surely couldn’t denounce Mr Cameron for looking after the immediate well-being of the most vulnerable people in society, and doing whatever he can to ensure our jobs don’t go abroad. Anything else exposes his opponent’s gutless opportunism and their lack of concern for the very people they are supposed to care for the most.
Tad Davison
Cambridge
October 24, 2013
Cameron pledged to have the “greenest government ever” so it’s acceptable to criticise him for trying to do the opposite.
Also there are other ways to tackle high energy prices, so your defence won’t be effective.
October 25, 2013
Socialist nonsense as ever. Try considering others points of view it might help you be less bitter. A bit Clegg, if you do not agree with his point of you he calls you names. Yesterday anyone who did not agree with his environment view was right wing, the man should look in the mirror and see what others see of him. No wonder they are losing votes hand over fist. It also might help if he stuck to his word even on the odd occasion.
October 25, 2013
How is pointing out that Cameron claimed he was going to have the “greenest government ever” not considering someone else’s point of view?
October 23, 2013
Having just watched Huhne on Channel 4, I say damn “insulation” in general for older houses. I believe that plastic double glazing and dangerous (retrospective) cavity wall insulation destroys lovely old traditional homes. Cannot understand why Huhne should be given such prominence especially so soon after his release from prison. He has been proven to lie through his teeth. And why was Major ever a Tory PM–bit like Cameron?
October 23, 2013
Here we go again…
You vote PPE, you get fashion and emotion rather than intelligent analysis (no reflection on you, as you have been consistent here)
So the fad has changed from the 2004-8 idea that we should pay more for energy to the current fad that we shouldn’t… we really need politicians who can work in a scientific manner rather than court elite uninformed opinion.
October 23, 2013
About time too, but about 10 years too late. Cameron is changing very slowly round to some reality (in some of his words at least). Too late now, he will not be trusted anyway as:-
1. He is controlled by the EU and still clearly still in love with the EU.
2. Has form on ratting on IHT the EU and other issues.
3. He still has Ed Davey and Greg Clarke in place, who clearly have bonkers ideas on energy production.
4. Has not got rid of the subsidies of 3 times the current value of electricity for wind and PV (which is actually worth far less than is on demand gas and coal energy). So he is paying, with our taxes, nearly 6 times the true value for PV and wind. While destroying the environment in the process and not even saving much C02 anyway – not that that matters as it is harmless plant and crop food (and a bit warmer is clearly on balance a good thing anyway) This should it actually have that effect, which it has not for 15 years.
October 23, 2013
Cameron even kept the dreadful (and now an ex (hopefully) criminal) Chris Huhne on to the very bitter end, now a regular “expert” yet again on TV I note, (and even his (words left out ed) wife too sometimes – it was all his fault she seems to think).
Have they no shame at all?
A shame Cameron did not just sack him for his absurd views on energy and the green religion. Why on earth did he appoint him, Ed Davey, Greg Clarke or Laws when he has people like Lilly, Jacob Rees-Mogg and JR about? Oh I know because he threw the last election away with his pro EU, fake green, big state, high tax, pre-election drivel and EU ratting.
October 24, 2013
No matter how much you try to deny it the evidence shows that warmer is not better, as warmer means for famines and droughts in many countries.
October 24, 2013
Uanime5
Show me where with evidence that temperature has risen leading to more famine and drought.
October 25, 2013
Here’s a scientific study showing that famines and droughts in Africa are being made worse due to the average global temperature rising:
http://onlinelibrary.wiley.com/doi/10.1002/grl.50235/abstract
Since I doubt that you’ll be willing to pay to read this article here’s a summary which explains that the spring rains were reduced due to the increased surface temperature of the sea, which was caused by global warming:
http://phys.org/news/2013-03-devastating-east-african-drought-climate.html
October 27, 2013
You didn’t read those articles did you. Neither are evidence at the level of “fact” you suggest, they do not “show” or “explain”. They are unproven opinions on issues of probability and the case of 2010 drought is attributed to something else entirely.
October 24, 2013
Nonsense more CO2 increases crop growth, as does slightly increased warmth and the resultant increased precipitation too. On balance it is likely to be beneficial.
October 25, 2013
No more CO2 only increases crop growth if there’s more sunlight, water, and nutrients. Since increased global temperature is reducing rainfall this means that any additional CO2 won’t result in more growth. In some parts of Africa the increased temperature is even making it too hot for the plants, turning large parts of Africa into a desert.
October 26, 2013
The statement that increased temperatures are reducing rainfall is false. You just made that up
October 27, 2013
Richard: “You [uanime5] just made that up.”
Yes, he lives in a rich inner world.
I’m still waiting for the proof that CO2 atmospheric concentrations have doubled since 1913 (the last 100 years), I’ve even given him the plot since 1958.
October 25, 2013
There have been deaths due to the one degree increase in average temperatures in Europe Uni, but nowhere near the many thousands who have died prematurely from the cold, now that the endless green policies and taxes you are a big supporter of, have made heating their homes too expensive for them.
So one can say that in Europe the figures show cold is more deadly.
October 23, 2013
“The Chancellor has stated clearly that he does want more affordable and reliable power for industry and homes, but finds the UK entangled in a dangerous web of EU rules and requirements which make this difficult to achieve.”
Now who said that?
The conclusion for The Chancellor must be inescapable. Throw off this dangerous web (which involves leaving the EU) or suffer the consequences.
Maybe he prefers to grumble about it and do nothing?
October 23, 2013
John,
Do you believe that the energy companies should take no blame at all for our high fuel bills?
October 24, 2013
An enlightening response!
October 26, 2013
Credible: “An elnightening response!”
Do you not think Redwood dealt with that in the original post. He clearly lays out that energy bils would be £171 less with out levies and tax.
Credible: “blame”
Given that energy companies work in an environment where the Government is busy destroying the value of the currency they trade in, it’s hardly surprising that as the value of a currency unit depreciates the things you exchange for a given currency unit appear to cost more.
October 23, 2013
In the bad old days, we used to have things called power stations which burned a lot of fuel and generated a lot of electricity. The National Grid connected to these for onward transmission to the regions. Now, we appear to have hundreds of useless windmills, PV and backup diesel generators generating the occasional erg of electrical energy; presumably the Grid has to connect to all this, account for what they are receiving, synchronise it to phase so it is not self cancelling and feed it into the main Grid. Who exactly is paying for all this self-inflicted inefficiency?
October 23, 2013
Although the BBC is promulgating the line that Mr Cameron had a terrible day today, it seems to me he could be onto an election winner with this. Miliband’s proposed price freeze will be as fatuous as the prices and incomes policies of Labour govts in the 1970s. People will increasingly resent the hypocrisy of it given Mr Miliband’s 2008 climate change act calls for 80% decarbonization by 2050 – something which can only be achieved (absent some technological breakthrough) by shutting down industry and by dramatic increases in the cost of domestic energy. Let’s get rid of green taxes and subsidies, but let’s also have proper public debate about global warming theory, which is the reason we got them in the first place.
October 24, 2013
Given that France generates 75% of their power through nuclear energy it’s entirely possible to decarbonise without shutting down industry or raising energy costs. Your scaremongering isn’t fooling anyone.
October 24, 2013
So Uanime5 you are in favour of a massive investment in nuclear in the UK?
Trouble is your socialist party is totally against it, your EU doesn’t mind it in France but is forcing our perfectly serviceable nuclear power plant here where I live to close down with the loss of 9,000 jobs. Never mind we at least got the worlds biggest offshore windfarm and ALL its wonderful green jobs ( 300 in total) Oh do you see what went wrong there?
October 25, 2013
I’m guessing you’re referring to Wylfa as this is the only power plant that will close down before the next election. Give that construction of Wylfa finished in 1971, it has been running for 43 years, and most nuclear power plants of this type (Magnox) are closed after 40-45 years I wouldn’t say it was still serviceable.
October 26, 2013
There is no scaremongering by me. Are you in favour of 100% nuclear power? That would be a change for the green-left. France does not have low energy costs, they have created nuclear capacity at huge public cost. There’s no way round it – the cheapest fuel by far is fossil fuel. If you dont want them, the cost must be picked up either by consumers or taxpayers.
October 23, 2013
Hard for plebs such as me to understand all this but am I correct when I say that you’re taking money from Energy companies by way of taxation etc and then also giving them subsidies for stuff that doesn’t even work?
If how I’ve read that is correct… can you please all go in for a psychiatric checkup, I think you might find that some marbles are missing.
Still, in Government we trust. We voted for you to represent us and all that.
October 23, 2013
Once again it just shows how, when a Government get involved in anything, commonsense goes out of the window, complication is rife and expensive.
Let us hope commonsense will prevail in the end, and all of these expensive extras will cease.
Why should I as a customer, who has completed and paid for all of my own insulation and energy savings projects (from Taxed income) to reduce all my usage and bills to the minimum, now pay for someone elses as well.
October 23, 2013
Personally I want rid of all of them.
The only one that has any social morality to it is that intended to help the vunerable – but even then how come these ‘vunerable’ people are not already in receipt of various benefits? And if so why do they need more benefits taken from hard pressed consumers?
The other thing that I question is whether the power companies are acting legally in passing on some of these costs as surcharges. Surely some are in fact levies (in effect taxes) on the companies, they are not levies on consumers, and should not be passed on directly and in full to consumers?
October 23, 2013
Would scrapping some of these measures wipe the smug smile off the faces of those people who have disfigured their houses so badly with hideous solar panels and who, currently, receive subsidised payback?
October 24, 2013
‘Fraid not. They have been ‘grandfathered’ and have a long term inflation linked contract. On the other hand, as most of them have been put on a roof facing east or west and even shaded by dormers, these returns will be less luctrative than they thought.
October 24, 2013
For those of us who have been banging on about this for years.
It’s about time!.
What a pity this was not initiated before the Milliband speech,it look like a reaction but at least more of the voters are aware of the cost of green levies.
October 24, 2013
Yes, well, given the vested interests supported by the EU and certain lobbies there and here, and given the fact that ‘green’ NGOs still drive the debate about climate change in the Energy ministry and above all in the BBC, ‘rolling back’ green taxes won’t happen.
After all, this government, IIRC, extended the CCA and did not repeal it.
And IIRC, we peasants keep being told that sadly nothing can be done about this because of the EU …
I am sorry, John, but on past experiences nothing will happen except perhaps punishing those greedy energy providers with that nice windfall tax proposed by John Major.
October 24, 2013
I want to thank you for pointing out so clearly what is being charged and how much extra it costs us, the consumers. Nobody else (as far as I can see) has actually bothered to do this – leaving the impression (deliberate?) that this is a sort of arcane matter which is down to whichever party you do not happen to support.
Well written!
(PS this crisis is largely driven, as far as I can see by politicians of all sorts and at all levels too – EU, our parliament (“Blue is Green” – last Labour government – LibDems) and local Greenies.)
October 24, 2013
JR: “There is also £60 of VAT (5%) courtesy of Sir John Major’s government and all subsequent governments”
1. Thank you for conceding that the Tories are not always blameless.
2. Does VAT get charged on all the other levies and tariffs?
October 24, 2013
Mr Redwood,
Thank you for the above breakdown. I am immediately struck by the question why my bill contains a levy to discount other people’s bills. Surely this is an obligation of running the company and should be born by the shareholders?
Yesterday I researched ways to reduce my annual bill. I knew this would be problematic as your government has, as ever, penalised the active in favour of the inactive by insisting that those who do not bother to shop around get the lowest rates. The consequence of this approach is less margin to offer savings to the proactive among us.
I was able to identify 8% savings over a year by switching suppliers. I do not want to switch suppliers as my payments are deliberately kept in arrears to my present supplier and moving involves a lump sum payment.
Why has your government’s review of tariffs not introduced real competition in the market? I phoned my supplier and asked them to match the other price available to me in the marketplace as I would have for an insurance renewal. Did they tell me my account was not worth negotiating over? No, they informed me they were only allowed to offer 4 simplified tariffs. That does not drive competition and is inconvenient to consumers who have to switch to get a better deal.
October 24, 2013
First of all I would like to see clearly marked on my bills all the taxes, levies, obligations and provisions so I know where the money is going. The direct taxation by the EU should be made particularly clear. However it does beg the question why Cameron apparently fought so hard to prevent the financial transaction tax but not a peep or complaint has been made about the energy transaction levies that everyone has to pay.
Next get rid of VAT on domestic gas and electricity, this would benefit everyone and those classed as vulnerable the most. It would also send a clear message to Sir John Major and co.
The rest should go ASAP with the exception of the Warm home discount, that’s the only element I would voluntarily pay over the fuel cost.
October 24, 2013
As you say:
“The way to achieve cheaper power, as explained before on this site, is to reopen closed mothballed older power stations, keep open the remaining lower cost older stations, and to generate more power from them at the expense of renewables. The subsidies for future additional renewable power should be reduced sharply or removed if you wish to cut future bills.”
Indeed but there is no sense or justification for any subsidy for wind, bio mass or PV at a. Not only are they circa 3 times the price, they are intermittent and thus their energy is worth far less. They are also environmentally very damaging.
They do not even, all thinks considered, save much CO2. Anyway C02 is not a problem, it now seems, other than in the mind for the priests of the new devil gas fiery hell quack science exaggeration religion/political construction. Certainly not in the minds of rational scientist.
Spend the money and sensible things now and adapt later, if and when needed. This is the only rational approach. It may well actually be colder in 100 years anyway, I would put it at about 50/50. But at least we will have more crop yields due to the small increase in C02 concentrations and more GM hopefully too.
October 24, 2013
Yo Redwood
Why should be fuel used for heating be tax free….we are told that emissions from cars are harmful to the environment and depleting finite fossil fuel reserves . So why are emissions from oil and gas fired boilers heating energy inefficient homes any different ?.
October 24, 2013
Indeed their is little logic for taxing one at about 150% and the other at just 5% it is the same c02 produced is it not?
October 24, 2013
It is indeed the self same CO2 albeit produced largely from gas and heating oil. I’m not sure of the exact proportion of other toxic gases released by domestic boilers but I would wager that the levels of other pollutants are higher than those produced from a modern car.
It’s funny how the left condemn those driving motor vehicles but cannot bring themselves to admit that their policies that result in uncontrolled immigration and family destruction result in extra households emitting many extra tons of CO2.
October 24, 2013
This is largely a diversion since it removes little more than 10% of the cost (at a cost of higher taxation elsewhere).
The main state parasitism is regulatory. Hinkley is costing 4 times what such plants are being built for elsewhere, and since it will take 10 years where it can be done in 3 the interest charges push that differential way up.
All in all around 90% of electricity cost is political parasitism and every intelligent MP knows it. That is why we are in recession while the non-EU world is growing at 6%.
October 24, 2013
Yet again you’ve confused a nuclear power plant with a nuclear reactor. The latter is cheaper and quicker to build because it’s only one part of a nuclear power plant.
October 24, 2013
You do talk some abject rubbish uni. Have you any idea how a nuclear power plant works. The primary circuit is the bit that makes it expensive. The power plant i.e. generators, switchgear etc are off the shelf bog standard units.
Containment, emergency cooling and the exceptionally high standards required for the primary circuit and steam generators is what takes the time and money. I bet you wouldn’t know a reactor if you sat in one.
October 25, 2013
Neil craig was comparing the cost of a nuclear power plant to the cost of a nuclear reactor. I pointed out this comparison was flawed because they’re not the same thing. The fact that different parts of a nuclear power plant cost different amounts of money doesn’t change this.
October 24, 2013
John
excellent that you should address this issue but like all other commentators you miss a couple of extremely important points
1. green policies have pushed up and will push up the wholesale cost of electricity. Moving from coal to more expensive fuels is part of the green madness. And where is the cost of e.g. converting Drax to wood pellets accounted for?
2. the cost of connecting windmills to the grid and stupid projects like STOR are hidden in the networks cost
It is about time that the government came clean on the true cost of the green madness. Perhaps you could raise a question in the house?
October 24, 2013
I’m not sure whether your figures come from OFGEM or DECC, but they seem to be inaccurate on a number of counts.
Firstly, they try to minimise the apparent impact of the cost by assuming that consumers don’t end up paying for the energy consumed in shops, offices, factories, streetlights etc. (often with a 20% VAT surcharge) via the bills they pay for goods and services. Domestic consumption of electricity is barely a third of the total, so we should multiply by three.
Secondly, Osborne’s carbon floor price has been running at £16/tonne since April, compared with the EU ETS prices which have mostly been below €5/tonne. Today it is trading at about €4.60/tonne or £3.92/tonne – less than a quarter of the floor price. That makes the relativity of £8 per bill for EU ETS and £5 for the carbon floor price look like it is wrong.
Thirdly, the size of “average” bill implied by the VAT is £1,260. How do we get to that? Here’s OFGEM’s answer:
Since January 2010 these have been set at 16,900 kilowatt hours (kWh) per year for gas and 4,000 kWh per year for electricity.
As of 13 September 2013 we are lowering these estimates by 9 per cent for gas and 5 per cent in electricity.
So your bill is magically cheaper, because they’re assuming you will consume less in the face of higher prices – but that says nothing about the prices.
The figures appear to be deeply disingenuous, and designed to disguise the real truth.
Reply DECC is the source
October 24, 2013
JR. Could you possibly ask Messrs Barker and Davy how they came to work out the 5/8th cost of the carbon floor tax relative to the EU ETS, when the levy is 4x the EU ETS prices. Also how do they come to price the Green Deal at £47 when the deal is that the cost of insulation, PV etc is covered by an increased charge on the electricity bill for 20 years. Also, as I confirmed from my own EPC figures the costs of wall and under floor insulation gave returns way below the 7% charged in the deal and it is not surprising that hardly anyone has taken it up. As so few have taken it, how come the cost is the highest by far? Perhaps you could ask this question too.
October 24, 2013
John,
I’ve never understood what is “smart” about smart meters? Or indeed exactly what a smart meter is? Perhaps my many years knowledge of electricity is an impediment to this Cameroon concept???
It does not generate a single Watt of electricity rather it consumes more than the existing meters. It is expensive, is likely to be unreliable and require more frequent replacement because of its electronic parts – just wait until a thunderstorm and a lightning strike!
How does the spin machine in Westminster describe it please?
October 24, 2013
The free electricity monitor given to me by EDF, and does the same sort of thing as a smart meter, used 16w and was supposed to be left on all the time. I switched everything off and realised it was the machine itself. On the other hand, smart meters will be able to tell us whether it is sensible to leave the freezer on and turn it off when the wind has left us short.
October 26, 2013
Atlas: “I’ve never understood what is “smart” about smart meters?”
One of the ‘smart’ feature of the electricity meters is that they can be instructed to cut off the electricity* by the electricity company for the purposes of energy distribution management.
That means that when the wind generating capacity gets to the stage where it destabilizes the grid, they can cut off individual consumers to balance the supply with demand.
So you may experience a power cut, but your neighbor next door may not.
*Wonder what the terrorists are going to make of this ‘smart feature’?
October 24, 2013
We can argue about whether green energy charges are recouped through general taxation or through energy bills. I prefer the latter but it’s not the main issue.
The main issue is the extent to which we can afford to use sources of energy which cost approximately DOUBLE what other sources cost. In the green corner are nuclear, solar, on shore wind and off shore wind. In the mucky brown corner are coal, gas and oil. For what it’s worth, gas is comparatively cheap and has lower emissions than coal or oil. This should also apply to shale gas.
October 24, 2013
If we reopen the closed power plants how long will they be used before an alternative is built? It’s not a good strategy to keep using power plants that are 60 years old or older so we don’t have to build new plants. Also most nuclear plants can’t be reopened because they can no longer operate safely, so this further limits our ability to reopen old plants.
October 25, 2013
I thought you would be all for the mantra of reduce, reuse and recycle and the idea of sustainability Uni, which is what would happen if these older plants were kept open or made good for operation once more .
Come on keep on message.
October 24, 2013
– Add removing efficieny costs : so £111 plus £60 VAT + £X +Y
+£X fitting in with greendream inefficiencies (the fact an energy corp has to runs it’as gas plan at low inefficiencies due to standy for windarm/solar)
+ £Y planning inefficiences (due to uncertainty about what tinkering the gov/EU is going to be doing in the future ..re Fracking planning )
– People complaining that the free market is not working ..well we DON’T have a free market we have a super TINKERED market .. with massive EU & government inteference. You can’t just make electricity and get on with it, no you have to build so much % renewables, take measures to cut your customers consumption.etc. All this tinkering removes from a energy corps key job.
– In a free market people who love green energy would have been able to choose to buy it from a GreenEnergyCorp and paid extra for the tinkering
– The people calling for industry nationalisation think we will end up cheaper ,cos profits will be removed, but actually a nationalised energy biz would actually end up being GreenEnergyCorpPlus with MAXIMUM TINKERED costs and therefore higher prices.
..but as someone suggested above gov could introduce a smaller gov energy corp to shake up the market. Well we could make it entirely green energy & call it “Ed Davey’s Big Green Energy Corp”. So if you want green energy you buy it there .
– BTW corps like the greentaxes : the higher the price the more £ a 5% profit margin is.
– Will the Greenpeace Broadcasting Corp START a policy of declaring an MP’s greenbiz interests when they give them airtime?
– Frack-on ! ..do we run this country by DramaGreen bullying or democracy
October 24, 2013
You need to include in your list, the increase in transmision costs from the National Grid to pay for connecting all this renewable energy.
October 24, 2013
Including renewal of all gas mains after 35 years. Perhaps another question for Messers Barker and Davy.
October 24, 2013
It is not so much the level of green taxes today to be angered about, but the direction of travel and its racheted implications each and every ensuing year. Tinkering around the edge while leaving the decarbonisation policy in place is inconsequential. As long as we remain in the EU and intend to decarbonise the energy sector according to the targeted ambitions of the Climate Change Act, the problem is insuperable.
All main Westminster parties and most current MPs and Lords still seen to fervently favour this ruinous and pointless policy. UKIP, backbench rebels and the intellectually unchallenged populus seem to be the only repository of rational thought and common sense on this madness.