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Lifting the lid on energy price rises

Posted on 15 December 2011

There’s been as lot of ill-informed debate about why energy prices have increased so much in recent years. Not surprising when bills have increased by as much as 75% in just six years, well ahead of inflation. The finger is often pointed at Government environmental policies. In fact, the picture is much more complex than that. Which is why the independent Committee on Climate Change is doing us all a great service by publishing a cool-headed, balanced analysis of the issue. This is just what we would expect from a committee chaired by Lord Adair “Two Brains” Turner. The Committee looked at the 84% of British households on dual fuel whose energy bills have increased from on average £605 in 2004 to £1,060 in 2010. Of this £455 increase, around £290 was due to increases in wholesale gas prices, £70 was due to increases in transmission and distribution costs, £45 was due to funding energy efficiency improvements in homes, £30 was due to Government levies to support investment in low carbon power generation and £20 was due to VAT increases. So Government low carbon policies explain 16% of the increase; the other 84% is rising energy costs and infrastructure costs. The report goes on to indulge in some crystal ball gazing about energy bills in 2020. I think forecasts like this should be taken with a huge pinch of salt. I set much more store on the historic analysis, which is based on fact, not conjecture. But if you believe their assumptions, the Committee says that energy bills in 2020 should be no higher than in 2010 if we continue to invest in energy efficiency. With smart meters, Green Deal and infrastructure upgrades coming down the tracks, it’s important that we are all kept clearly informed of what makes up our bills. We need hard data, not hot air.

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