Energy bill hikes to last 17 more years - watchdog

Pylons near Barking Power Station in east London Customers could be faced with funding huge infrastructure projects

Consumers face 17 more years of above-inflation increases in energy and water bills as they help pay for the renewal of the UK's infrastructure, Whitehall's spending watchdog has warned.

The National Audit Office added that "gaps" in the official analysis meant government lacked "an overall picture of affordability".

It expressed particular concern about low-income households.

But the government said it was "committed" to keeping bills down.

Fuel costs have become a highly charged political issue in recent months.

Five of the UK's six main energy companies have announced price rises, at an average of 8.1%.

On Tuesday, EDF Energy became the latest provider to increase bills, by an average of 3.9%.

'Wider costs'

Alan Young, from energy company SSE, told BBC Radio 4's Today programme: "Standards in this industry do need to improve." But he denied his company was trying to make a "quick buck" from its customers.


The report from the NAO may have got far less coverage if a political row over energy bills had not been ignited at this year's Labour conference when Ed Miliband called for a price freeze.

Many of the figures in the NAO report - helpfully brought together in one place - aren't new. But they are certainly receiving unprecedented scrutiny.

The 18% rise in real terms in energy bills by 2030 comes straight from a government department, DECC.

But what the report achieves is a means of putting the current political row into context - the government are looking at knocking off maybe £50 to £70 from energy bills by transferring the cost of some 'green schemes' to taxation.

Labour's freeze would last just 20 months, against a backdrop of significantly rising prices for perhaps nearly 20 years.

So the inconvenient truth is that, whoever is in power after the next election, they will preside over pressure for higher bills.

So, despite the political dividing lines being drawn over a short-term price freeze at election time, the longer term questions are whether any reform of the market would rein in increases in costs - and what would the parties do to protect the poorest from the end of the era of cheap energy.

"We're interested in making a sustainable profit that allows us to invest in the long term," he said.

"This country has had reliable supplies of energy. When people have gone to switch the lights on, they have come on.

"Have there been shortcomings in standards? Absolutely. Is there a commitment on our part to improve them? Totally.

"But fundamentally people have got reliable supplies of energy for their money. We're concerned that they should continue to do so, but in a way that is affordable."

In September, Labour leader Ed Miliband announced plans for a 20-month energy price freeze from May 2015, should his party win the next election.

And the government has launched a competition review and will review green and social charges, responsible for some of the cost of bills.

In an escalation of rhetoric, Liberal Democrat Energy Secretary Ed Davey told an industry conference on Tuesday that firms should not use customers as "cash cows".

The Treasury estimates that at least two-thirds of the £310bn of planned infrastructure investment over the next decade and beyond will come from private companies, ultimately paid for by consumers.

In its report, the National Audit Office (NAO) said it was estimated there would be an 18% average real-terms increase in household energy bills between now and 2030. For water, the figure would be 28%.

'Decades of underinvestment'

The NAO also said: "Affordability can only be assessed taking into account all household bills, household incomes and wider costs of living.

"Gaps in analysis, and the lack of a common approach to measuring affordability, mean that the government does not have an overall picture of affordability, either for the average household or for those on low incomes."

The NAO expressed particular concern about the plight of the low-income households where energy and water bills accounted for 15% of spending in 2011 - almost double the overall average of 8% - while their incomes had fallen by 11% in real terms since 2002.

A Conservative source said: "We agree with the NAO that government should 'rigorously scrutinise all decisions on both value for money and affordability grounds', that is why the prime minister has announced that we need to roll back some of the green regulations and charges that are putting up bills at the Autumn Statement."

And a government spokesman said: "Decades of underinvestment have left the UK struggling with insufficient energy infrastructure, but we are committed to fixing the failures of previous governments, and to making the difficult decisions that will allow us to have the infrastructure we need.

"The government is committed to supporting hard-working families and that's why we're cutting tax for 25 million people and taking 2.7 million people out of income tax altogether by 2014, helping the most vulnerable with their bills, freezing fuel duty and sticking to the economic plan that has got all sectors of the economy growing."


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  • rate this

    Comment number 42.

    In Britain we like to moan. 77% of tenants have never switched energy provider (OFGEM report Sept 2013). If people switched supplier then there would be more incentive for energy companies to offer competitive prices to gain market share. If you've never switched supplier and you are still on the "standard" tariff then you can't moan about high energy prices.

  • rate this

    Comment number 40.

    All this privatisation is not only about profits for companies and subsequently shareholders but also and more worrying than the above, the Politician's need to relinquish responsibility
    State owned utilities or railways forced politicians to act failure to do so meant they lost their seat

    Now they have the perfect pass the buck situation and thus cannot be held responsible

    This needs addressing

  • rate this

    Comment number 9.

    There is one thing that I do not understand:

    If energy suppliers need to increase prices due to increased cost in wholesale energy supplies and infrastructure investment, how have all of the main energy suppliers consecutively reported not only increased profits, but record profits?

    Such disproportionality between increased price vs cost is blatant highway robbery, and it is sickening.

  • rate this

    Comment number 4.

    I only use the heating now for one hour in the morning to take off the chill and one hour when I get home from work. There really is no extra left to be found. The workers of this country simply have had enough of this farce. The government, whichever party they are should hang their heads in shame

  • rate this

    Comment number 2.

    The temporary rainbow lottery win pot of gold that was/is north sea oil & gas SHOULD have paid for UKs long term energy infrastructure, including green energy. Instead, it was used/wasted on vote buying policys & non sustainable public expenditure.

    IF, fracking does go ahead, it is UKs LAST chance to fund a BETTER future, but already plans are to buy off communitys & wealth just gets pocketed


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