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.

Analysis

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
    +121

    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
    +6

    Comment number 39.

    17 years? That sounds like a low estimate!

    They will rip us off as much as possible for as long as they are allowed to, the govt are supposed to be the ones representing our interests and they should have done something about this years ago.

    It's sickening that they can pay out massive dividends but then cry poverty when asked to invest in the future!

  • rate this
    +2

    Comment number 38.

    One of the main reasons that energy prices are so high for domestic consumers is that industrial consumers costs are so low.
    Industrial consumer actually consumer over half of the UK electricity as a result domestic consumers are actually subsidising industry.
    Costs are shown here
    http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Electricity_and_natural_gas_price_statistics

  • rate this
    +2

    Comment number 37.

    As the Energy Companies battle for top spot on the share/dividend rankings - each base point rise paid for by people going without heating and lighting.

  • rate this
    +14

    Comment number 36.

    I'm appalled at the irony of paying a "standing charge" on my utilities for the infrastructure, then paying it again in additional charges and TAX.
    Although the Government (past and present) couldn't be called capable of even running a coffee shop, at least when utilities were government owned the taxpayer could be sure he wasn't contributing to a shareholders profits. Truly disgusting.

  • rate this
    +76

    Comment number 35.

    .

    We now see the disastrous consequences of Thatchers privatisation and yet we still don’t learn, time to nationalise all utility’s

    .

  • rate this
    +7

    Comment number 34.

    According to ofgem the cost of building and maintaining infrastructure is already covered by the distribution and transmisssion charges (approx 20% of the bill) so this is amazing value for money for the energy companies, free profit!
    https://www.ofgem.gov.uk/ofgem-publications/64006/householdenergybillsexplainedudjuly2013web.pdf

  • rate this
    +25

    Comment number 33.

    How many times have we witnessed the fecklessness of government?

    Withold investment from the railways until the system is falling apart and then obtain the necessary investment though privatisation.

    Take the profits from the Royal Mail until it starts to fail and then privatise it.

    Neglect the water and sewerage system...

    Fail to invest in energy infrastructure, break it up and privatise it.

  • rate this
    +1

    Comment number 32.

    Above: "In September, Labour leader Ed Miliband announced plans for a 20-month energy price freeze from May 2015..."
    Ed Miliband also said it was a breathing space to reset the market - to separate generation from supply, among other things. It's now clear that privatising the utilities was a very bad mistake and Thatcher was wrong. A free market is a recipe for disaster.

  • rate this
    +2

    Comment number 31.

    That's parliamentary NIMBYism for you! Everyone is against any sort of power generation in their constituency... "coal is polluting, nuclear dangerous, wind ugly" etc so nothing has been done for decades, there are enough fighting against every solution and enough MP's out only to keep their jobs that a vocal minority beats the majority every time.

    Democracy? Or Pressure Group Dictatorship?

  • rate this
    +3

    Comment number 30.

    As a nation, why don't we learn from North Sea Oil/Gas experiences and embrace Shale Gas, but use this wind fall to invest in renewables, this freeing up green levies on household bill?

  • rate this
    +2

    Comment number 29.

    OK then i guarantuee there will be civil unrest, people cannot take anymore, the low paid will literally either starve or freeze, is this modern day Britain? its just not acceptable.

  • rate this
    -3

    Comment number 28.

    Energy from non-renewables is finite, increasingly expensive and the earth's population is 7 billion and headed for 11 billion.

    Half the cost of energy is buying it wholesale and a quarter the cost is moving it from producer to you. Neither of these things can be affected short-term by a UK Govt whatever their political persuasion. Anyone who tells you any different is assuming you're gullible.

  • rate this
    +2

    Comment number 27.

    The Government's Green Deal initiative was far too weak an offering and in fact very short-sighted.

    People need access to real money... NOW... because the is THE investment opportunity to revitalise our economy. People need funds NOW to buy new Boilers, to lag their homes, to install Energy Control Systems, and other housing retrofit solutions

    Where is the LEADER of vision who'll drive this?

  • rate this
    +3

    Comment number 26.

    Wonderful, is this the way we are not to be used as "Cash cows" then !
    It might be a revolutionary step for them but I wonder if they have considered re-investing their profits to upgrade and better serve us instead of doling out large bonuses and dividends.

  • rate this
    +3

    Comment number 25.

    17 years yeh good luck with that?

    Just a little note to the toffs at westminister be they red or blue......."Be prepared for a rough ride boys and girls, you and your mates in the big six won't know whats hit you if you think this is an option that will result in anything but your downfall".

  • rate this
    +39

    Comment number 24.

    No reputable company runs its equipment past its natural life. The last time our sewers got a major update was back in the days of Bazalgette, and only then to cure the great stench in Victorian London. Ageing power stations forced to close due to regulations in force for years, with no thought of what replaces them, then panic buying of an overpriced Chinese replacement, for which we pay.

  • rate this
    +1

    Comment number 23.

    WITH, the connivance of PARLIAMENTARIANS! THESE COMPANIES want to install the so called green energy, let the do what they have always done; pay for it themselves. NOT the consumer. Otherwise, you will see a GREAT reduction in consumption from the general public WHO ARE NOT CASH COWS!! and your cost will spiral up with the inevitable cost cutting until the public have said: Enough is enough!

  • rate this
    +3

    Comment number 22.

    Not a surprise when you consider the "strike price" for Hinkley C.

  • rate this
    +42

    Comment number 21.

    All public infrastructure roads, sewers, railways, power generation & water delivery have suffered chronic under investment for decades. They are crumbling. All Utilities etc were sold off from the 1980's so private business would pick up the tab to replace crumbling Victorian infrastructure. What wasn't said was that rather than The State, the consumers would now pay and pay handsomely.

 

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