Government outlines plans to cut energy bills

As widely reported, the government will remove levies on energy bills that fund the Warm Homes Discount scheme, saving the average bill payer £12 off their annual total. In addition, the government will slow down the rollout of the Energy Company Obligation (ECO), extending the scheme from two years to four years by reducing the carbon emissions reduction obligation element by 33% for 2015, pushing the original target back to 2017.

DECC estimates that the extension of ECO will result in savings of around £30-35 off the average annual fuel bill. The department insists that, despite the announced changes, the level of ECO activity directed at low income and vulnerable households will stay the same. However, the move has been met with widespread criticism from green groups.

As part of the energy bill reforms, DECC has sought to bring clarity over the continued support for measures that incentivise renewable energy generation. A DECC statement read: “In order to provide investor certainty at a time when the UK needs unprecedented investment in energy security, levies providing support for existing low carbon energy projects will not change, such as the renewables obligation (RO), contracts for difference (CfDs) and feed in tariffs (FiTs). Without this investment, energy security would be jeopardised as Britain would become ever more dependent on imported oil and gas, and energy bills in the future would be increasingly subject to high and volatile fossil fuel prices.”

The announced energy bill reforms will also include a number of new measures designed to help boost energy efficiency which the government claims will be worth £540 million over three years.

DECC is introducing a scheme for people who buy a new home that could see them get “up to £1,000 from the government to spend on important energy-saving measures…or up to £4,000 for particularly expensive measures". DECC states that the scheme will be available to all people moving house including those who don’t pay stamp duty.

The government will also be introducing a new scheme that is designed to support private landlords improve the energy efficiency of their properties, a move DECC estimates will help 15,000 of the least energy efficient rental properties. The scheme will work towards the pre-planned minimum energy efficiency standards for private landlords due to be introduced in 2018. Under the new scheme DECC will move funding available through the Green Deal to help them meet the minimum standards.

DECC has also set aside £90 million to spend on improving the energy efficiency of schools, hospitals and other public sector buildings over the next three years. The department estimates that the proposed measures will save around 2.7-2.9Mt of CO2, ensuring that the impact of the proposed energy bill changes is carbon neutral.  

Commenting on the proposals, energy and climate change secretary Edward Davey said: “Today’s package ensures that energy companies are not off the hook. They will keep up their efforts to help people in fuel poverty cut their bills by making sure their homes leak less heat, and they will have to be more transparent about what they’re spending on social and environmental measures.

Davey continued: “This won’t affect our commitment to tackling dangerous climate change through reducing Britain’s CO2 emissions, which will be backed by £540 million in new investment to make sure Britain’s homes and public sector buildings are more energy efficient, permanently reducing their bills.”

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