Energy suppliers have told Ed Miliband to increase the cost of gas boilers to boost the uptake of heat pumps and electric vehicles – because nothing says ‘good product’ like deliberately increasing the prices of competitors. The Telegraph has more.
In a letter to the Energy Secretary, suppliers including EDF, EOn, Octopus and OVO warned that a typical household paid four times as much per year in levies on electricity usage than on gas usage.
This makes it less financially attractive to switch to electrically-powered heating and transport, they said, even though Ministers want households to adopt EVs and heat pumps to help reduce carbon emissions and Britain’s dependence on natural gas.
The suppliers, supported by charities including Citizens Advice and National Energy Action, called on Mr Miliband to urgently review the system and “rebalance” levies so that they were more evenly spread between electricity and gas usage.
In practice, this would mean charges on gas bills would have to go up for millions of households.
The intervention came as the cap on a typical dual-fuel household energy bill rose by £111 a year to £1,849 on Tuesday.
In their letter to Mr Miliband, around 30 organisations including suppliers, investors, industry associations, and charities in the Electrify Britain campaign said: “British people and industry are paying some of the highest electricity prices in the world.
“We ask that you initiate a consultation process to urgently address Britain’s high energy bills. This should include policy levy reform.
“If the Government wants people to adopt electric cookers, heating and cars, it must stop giving older technologies and fossil fuels a de facto subsidy over electricity.”
While a typical household with a gas boiler pays about £250 per year in levies, this would rise to £480 per year if they adopted a heat pump. The letter’s signatories argued this makes no sense, given that using electricity is four times more energy-efficient than burning gas.
The Government has been examining potential reforms of green levies on energy bills for years, with a review initially started under the previous Conservative administration. However, the various options all look politically difficult.
One option often favoured by energy companies is to abolish the levies altogether and fund Net Zero schemes from general taxation instead. This would mean households progressively pay more depending on their income.
However, that would require Chancellor Rachel Reeves to break Labour’s promise not to raise taxes on working people. The suppliers admitted in their letter the “current economic environment” meant this was “likely not possible”.
Alternative options include either shifting specific levies over from electricity bills to gas bills, or combining the cost of all levies into a single pot and then deciding how the total should be split. …
On Tuesday, a spokesman for the Department for Energy Security and Net Zero said: “We are looking at a range of options for longer term energy market reform, including the rebalancing of gas and electricity prices, with the impact on consumers at the heart of our approach. We will set out further details in due course.”
The letter coincided with the reintroduction of the so-called boiler tax scheme, officially known as the Clean Heat Market Mechanism. This requires suppliers of UK domestic gas or oil boilers to increase their share of heat pump sales each year between now and 2029 – or face fines potentially totalling millions of pounds.
It was dubbed the boiler tax because the fines could only have been paid by increasing the price of boilers by an estimated £120.
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