Energy firm warns bills to rise by more than government forecasts

 
Wind farm in Barrow in Furness RWE Npower says it supports government plans to invest in renewable energy

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Annual household energy bills by 2020 are likely to be £100 higher than government projections, says energy firm RWE Npower.

It says official predictions of future energy savings are over-optimistic and warns the annual average bill will be £240 above current levels by 2020.

The firm says it supports government plans to renew power networks and build more renewables such as wind and solar.

But it says there must be more honesty about the costs of this investment.

It comes as a new poll by Cardiff University suggests that the public is willing to pay extra for clean and reliable energy.

'Heroic assumptions'

Start Quote

What's interesting is that, despite what you might see in parts of the media, it's clear that very broadly the public want a long-term commitment to clean energy”

End Quote Professor Nick Pidgeon Cardiff University

Both reports acknowledge, though, that the public does not trust energy firms or government - and both say trust must be restored if energy policy is to succeed.

In Npower’s case, the trust exercise starts with a publication setting out exactly how bills are likely to rise in order to renew the creaking energy supply system and install clean energy supplies.

The firm says it believes the government has underestimated the effect of this investment on bills, because its calculations rely on “heroic” assumptions about the energy individuals will save through efficiency and behaviour change.

This criticism has frequently been levelled at the government’s projections.

The firm warns that unless people strive much harder to reduce energy use, the average combined fuel bill in 2020 will be about £1,487 a year - that's £200 more than now and £100 more than the government projects.

The company says it is essential for energy firms - often accused of profiteering and misleading customers - to be honest about future bills.

'Blame game'

The new chief executive of Npower, Paul Massara, said: “Energy costs are rising. This is an indisputable fact, and it’s time that all of us involved in energy in the UK are upfront about it.”

He went on: “We are very clear that we do not want to be critical of government - rather, we want to ensure customers have the facts, so that they understand that for this cost, they will get a low-carbon economy, security of supply and warm, insulated homes.”

He said his firm was calling for an end to the energy “blame game”.

Public views on renewable energy

  • 82% worried about fossil fuel import dependency
  • 79% keen to reduce fossil fuel usage
  • 85% supportive of power from the sun
  • 75% supportive of wind power
  • 74% concerned about climate change

Source: Cardiff University

The report is issued coincidentally as the academic body, the UK Energy Research Centre, warns that plans for a clean energy future risk being undermined by lack of trust.

A poll of about 2,500 people commissioned through Cardiff University suggests that the public is worried about dependency on fossil fuel imports (82%); keen to reduce use of fossil fuels (79%); supportive of power from the sun (85%) and wind (75%); and concerned about climate change (74%).

The report’s authors say people are willing to pay extra to obtain a stable energy supply. The lead author, Prof Nick Pidgeon, said people would also pay more overall to avoid sudden peaks in prices. He said the researchers had not tested specific figures in the poll because projections about future energy costs were “notoriously slippery”.

Keeping the lights on
Floodlights at a football match The government says its policies will prevent blackouts

“What’s interesting is that despite what you might see in parts of the media, it’s clear that very broadly the public want a long-term commitment to clean energy,” he told BBC News.

“But the trust issue is critical. We have seen protests round energy system developments like wind farms over recent years. There won’t be all the investment that’s needed on energy systems if the energy firms and the government can’t persuade people to trust them.”

He said young people dependent on electronic gadgets were very worried about the prospect of black-outs and willing to pay to avoid them.

But he envisages a Catch-22 in which the government and energy firms fail to deliver the energy future that people want, because the public don’t trust them.

'Claims'

The Association for Conservation of Energy is one body that does not trust the firms.

Its director, Andrew Warren, told BBC News that Npower's projections on energy savings could not be trusted: "The big energy companies have definite form, when they start warning that they can't deliver the energy savings schemes that government mandates at the price that government projects.

"They claim at the start that the scheme will cost them far more than the official forecasts, in order to try to minimise the size of the obligation placed upon them."

The government said its policies would keep the lights on and help to smooth bills by reducing dependency on the gas imports that have caused recent jumps in energy prices.

Greg Barker, Minister for Energy and Climate Change, said: “It is right that we have a grown-up discussion about the impact of energy investment. However, global gas prices, not green policies, have been primarily pushing up energy bills.

“In 2020, bills will be £166 lower than they would be if we left ourselves exposed to global price shocks, left our homes leaking energy, and left future generations to deal with climate change.”

Follow Roger on Twitter @rharrabin

 

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  • rate this
    +4

    Comment number 165.

    until the British people realise that we are not subsiding the private sector, we are funding it. MPs are giving our money to the private sector when it should be lent to them with interest

  • rate this
    +4

    Comment number 164.

    The green energy initiative is nonsense and just an excuse to charge more. My husband has been installing cables at sea for offshore wind farms and tells me it is widely known that these farms will NEVER pay for themselves, let alone provide enough sustainable energy for the future. We are paying for a white elephant.

  • rate this
    +1

    Comment number 163.

    Is this the same RWE Npower who are sacking 100 of their staff at their head office in Swindon?

    http://goo.gl/J8KP0

    Money. Money. Money.

  • rate this
    0

    Comment number 162.

    re top rated 19
    "greedy profit driven companies mean higher bills"
    Does that include Tesco? Sainsbury's? WH Smith? B&Q? Every pub and restaurant in the country? Thomas Cook? BA? Ford? Toyota? Vodaphone? Apple? Microsoft? ITV? Sky? Unilever? BP? Shell?
    Where do you draw the line, or is the puritan socialism of North Korea preferable?

  • rate this
    +5

    Comment number 161.

    Of course bills will rise; we can't expect energy companies to reduce their profit margins to pay for investment in their own network. Madness, of course the consumer is responsible for their infrastructure! This is how privatisation works right? The government are alleviated of the responsibility for the industry whilst nothing changes for the taxpayer/consumer.

  • rate this
    +2

    Comment number 160.

    Tell "Sid" to go forth and multiply.

  • rate this
    +2

    Comment number 159.

    We do need to cut our energy consumption. We didn't address the question "can the rest of the world use as much energy per head as we do", and de facto now the answer is "yes, they can". Renewables, storage of power, tidal and waves, all needed. For the traditionalists, Gluttony is still a deadly sin.

  • rate this
    +28

    Comment number 158.

    When wholesale energy prices go up the suppliers insist that they must pass the increases on to consumers, but when they go down suppliers remain mysteriously quiet.

    Using this principle, even if average wholesale energy prices over the year remain the same, the prices charged to consumers could still have risen significantly.

    UK Energy privatisation just handed a monopoly to a cartel of sharks!

  • rate this
    +1

    Comment number 157.

    Everyone proud of reducing their usage to save money is deluded. Save energy for "green" reasons by all means (although that may be futile in the long run); but be assured prices WILL rise to make up the shortfall.

    If we all used half the amount of energy then prices would double. It's a sad and unavoidable fact of business I'm afraid. Only a moral business or government can change it. No chance.

  • rate this
    +2

    Comment number 156.

    Yet the government still presses ahead with this mad, mad, energy policy.

    Their answer to energy blackouts are farms of expensive DIESEL generators; shooting up across the country while they encourage the conversion from coal to woodchips with ever higher subsidies - which we end up paying for.

    And with at least 40 years of cheap shale gas at our feet (10% of supply) they DO NOTHING.

  • rate this
    +2

    Comment number 155.

    We now know that we have hundreds of years of coal and shale gas underground, lets develop this and become energy independent.

  • rate this
    +4

    Comment number 154.

    It's obvious these companies cannot be trusted to introduce a fair pricing scheme - therefore its time to nationalise and regain control for the greater good.

  • rate this
    +28

    Comment number 153.

    Privatisation and essential services don't mix. It doesn't take a genius to understand this. Things like Rail, Health and Energy should be non-profit public services.

  • rate this
    0

    Comment number 152.

    132 miklatov
    if we all chipped in
    yes that is exactly what we are being forced to do- we are paying via energy taxes- it will still get more expensive- even with us chipping in

  • rate this
    +1

    Comment number 151.

    134.si8353
    3 Minutes ago
    2: Subsidise solar panels for rooftops. There is a vast amount of unused space which can solve our energy crisis.

    +++

    A friend of mine knows a chap in Italy who got a free barn for having its roof dedicated to PV generation.

  • rate this
    +84

    Comment number 150.

    Yes, it's that time of year - the first warning has been given. Increases to take place starting November I should imagine. The double whammy - the more we reduce energy use, the greater the price increase to maintain the revenue stream - the consumer cannot win and the "watchdog" is a chocolate teapot.

  • rate this
    +1

    Comment number 149.

    It is essential for energy prices to rise. As householders trim energy consumption by whatever means then the energy firms MUST increase prices to at least maintain turnover. Any company that loses turnover will find shareholders dumping the shares which would be a disaster. Householders and cost of living do not matter so as consumption drops prices must rise irrespective of operating costs.

  • rate this
    +2

    Comment number 148.

    "138.
    ghettoliving
    I would love to have someone list the kwh cost for gas & electricity in other EU countries & perhaps wider afield."

    See posts 102 and 33. These stats are readily available by using a facility known as "google". You might like to acquaint yourselves with it.

  • rate this
    +2

    Comment number 147.

    BoE is ignoring inflation at the economy's peril.

    We dont want anymore high energy, transport and housing inflation!

    NO MORE!

  • rate this
    0

    Comment number 146.

    Fracking anyone?

 

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