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Power companies hit

Robert Peston | 13:15 UK time, Wednesday, 12 March 2008

Bad news for energy companies and - presumably - good news for those on lowest incomes.

The chancellor wants the power businesses in the current year to treble to £150m what they spend on “social tariffs”. That would mean they would charge less for gas and electricity to those who have least.

There was no detail on precisely how he’ll extract these subsidies from them.

And many of them will grumble.

And there’s a whammy for power generators.

From 2012, they’ll have to bid for their permits to pollute under the emissions trading scheme (they were given them in the first phase of this scheme).

The reason that the power generators, as opposed to other companies, will be hit first with a cost that could be significant is that they are not in competition with overseas companies, but only with each other.

So they would not be put at a competitive disadvantage by this de facto tax.

But when they are hit with this new cost, they will presumably simply pass it on to us.

Comments   Post your comment

  • 1.
  • At 01:37 PM on 12 Mar 2008,
  • colin Morris wrote:

Its nice to see that putting up fuel duty is going to help the environment where has the rest of the fuel duty gone

  • 2.
  • At 01:38 PM on 12 Mar 2008,
  • colin Morris wrote:

could you please tell me if £62 million is going on helping people back to work where is it going could my job centre wont even give me £120 towards training needed to help me get back to work

  • 3.
  • At 02:01 PM on 12 Mar 2008,
  • Wayne Latham wrote:

Chanceller says that from 2012 energy companies with have to bid for their permits, would this not make smaller companies go out of bussiness as surley larger companies can afford to bid more?

If this is the case the how does tghis benefit the customer?

Actually the chancellor merely "wished" that the energy companies would take action, "in the next period of time"

This equals no action whatsoever. This was designed solely to get good, yet utterly misleading, media coverage and you have fallen for it.

  • 5.
  • At 02:10 PM on 12 Mar 2008,
  • colin wrote:

this is a good idea for the energy companys as they get alot of revenue up front that they can use and no worries about no payment of bills so why not give something back to those who pay as they go.

  • 6.
  • At 02:48 PM on 12 Mar 2008,
  • Alexander Lewis Jones wrote:

"But when they are hit with this new cost, they will presumably simply pass it on to us."

Two points:

1. Power companies that manage to produce less CO2 will pay less for their permits, which will encourage power companies to produce less CO2. Surely this is a good thing?

2. If prices go up for the consumer, we will have a bigger incentive to reduce energy consumption. Surely this is also a good thing?


  • 7.
  • At 03:00 PM on 12 Mar 2008,
  • Paul wrote:

This is a refreshing change for an industry persecuted by the media and government alike.

Its good to see that British Gas would be least effected by these changes.

Did you know that around £7 out of every £10 spent on tackling fuel poverty comes from British Gas? That’s 70 per cent, and their market share is about 33 per cent.

That coupled with the permits for pollution which will affect British Gas less than the other main suppliers - as none of its power plants are on the infamous 'dirty thirty' list - this is nothing but good news.

This should produce a significant business advantage compared with current climates - time to get the shares.

  • 8.
  • At 03:48 PM on 12 Mar 2008,
  • matt marshall wrote:

What a fantastic stealth tax, the energy industry buys CO2 permits (I presume from the government), which darling knows full well will be passed on to the consumer. Additionally, squeezing the overall carbon targets for the UK, will then allow the government to auction off the savings against our koyoto target on the global CO2 market. Double whammy!

  • 9.
  • At 03:53 PM on 12 Mar 2008,
  • darren s wrote:

After seeing the budget,it was worked out that my family would be £98 pounds or so a year better off.However upon opening my new water bill this afternoon,£100 of that has already gone.The fact that other utilty bills have soared this year does not seem to have been taken into account.For this reason could someone please explain how I am to be better off.

  • 10.
  • At 04:07 PM on 12 Mar 2008,
  • Alistair Steel wrote:

All European electricity generators already include the cost of carbon permits in their prices even though they are given up to 90% of them free of charge. This carbon cost is also included in none CO2 emitting generation like nuclear and hydro. So domestic and industrial users alike pay highly inflated prices which bear little resemblance to the cost of generation. We're all being ripped off!
When auctioning of permits starts in 2013 all governments across Europe will raise huge revenues for their exchequers (at the expense of the generators)without the political fallout to be anticipated from other tax raising measures. We should start asking what this cash is going to be used for.

  • 11.
  • At 04:20 PM on 12 Mar 2008,
  • James wrote:

Interesting that it gets mentioned in the budget and the BBC thinks its news. Phase III of the EU ETS is an auction and always has been so everyone will have to bid for allowances for post 2012. Not news or related to the budget so the government can't really claim credit for that idea. It should incentivise power companies to build cleaner plant, if the government will let them.

  • 12.
  • At 04:28 PM on 12 Mar 2008,
  • Tony Humphreys wrote:

And where is the money to reduce the prices on card meters going to come from.

Me - I presume. There is a reason that card meters are more expensive 1) that arrears are bundled in, 2) the families are not the best payers, and represent an increased risk of receiving a service they wont pay for and 3) they cost more to run.

Perhaps we should be enforcing financial diligence onto those that cant add, and check for such things as sky, play stations etc before ramping up my electric to pay for these idiots.

Sorry, I pay my bills on time, and I don't get something I cant afford, its high time you did this too.

  • 13.
  • At 06:44 PM on 12 Mar 2008,
  • Peter Hartnell wrote:

Good news for EDF which pumps electricity under the channel from its nuclear power stations, to us in SE England.

  • 14.
  • At 10:33 PM on 12 Mar 2008,
  • Joe wrote:

The UK is a country where heating is a necessity .

I find it amazing that the free market economics is failing. Instead of tweeking the supply dynamics for the poorly paid, perhaps they should be paid more so that they can afford the bills.

Why is a politicians answer always to play with the dynamics rather than fix the fundamentals.

The Gas and Electic companies will be part of the DSS soon!

The problem is simple .. Poorest paid, wage rise 15% rise .. It's not rocket science my Westminster gents.

Passing the cost of auctioned emissions allowances on to consumers is a consequence that we would expect from the Emissions Trading Scheme. In fact, the suppliers already pass the market value of freely allocated credits onto their customers!

The social tariff issue seems trickier. Won't the suppliers try to make their poor customers go elsewhere if they are obliged to give them cheap energy?

  • 16.
  • At 04:47 PM on 13 Mar 2008,
  • Yummy Carol Kirkwood wrote:

The scandal of the gas and electricity companies is that they charge LESS (per unit) the more that you use each quarter. How exactly is that reconciled with the aims of reducing CO2 emissions and combatting climate change? The energy companies should be forced to change their tariffs so that it costs MORE per unit the more you use, perhaps even including a free (or very cheap) quarterly allowance. As such, everybody, including those in fuel poverty, should be able to afford the absolute minimum of gas and electricity that they need, and this would be subsidised by the high costs to those that can afford to be (and are) wasteful.

Rocket science? No.

Thinking outside of the box? Maybe a bit.

Capitalist? Certainly not.

Environmentally friendly and socially responsible? Absolutely.

Should I be running the country? Probably, but no thanks 8-)

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