Markets

Wind Power Costs May Increase Gas Bills by £1,000

By Hazle Jakubowski

May 25, 2024

138

The UK Energy Secretary, Claire Coutinho, is currently mulling over official plans that could see gas bills rise by an estimated £1,000 to fund wind power. This comes after she received a report earlier this year suggesting the possibility of shifting green levies from electricity bills to gas bills or incorporating them into general taxation. 
 
These proposals were put forward by officials at the Department for Energy Security and Net Zero (DESNZ) amidst concerns that the burden of green levies on household costs was hindering progress towards achieving net zero emissions. However, they have raised eyebrows due to the potential costs to households relying heavily on gas and the perceived fairness of applying these levies to electricity bills. 
 
An analysis conducted by Cadent, a leading gas distribution company, concluded energy bills would surge by approximately £1,045 per annum for millions of homes reliant on gas if all green tariffs were moved from electricity to gas bills. The study found such changes would most severely impact low-income families who rely mostly on gas for heating, making up almost half (47%) of their overall energy bill. 
 
Furthermore, it was discovered that running costs for consumers using natural gas would be between £879 and £924 higher annually than those utilizing heat pumps come 2035 if these adjustments were made. Critics argue adding green levies to already high gas prices will inevitably lead to increased fuel poverty as fewer households bear more cost burdens. 
 
This controversial discussion emerged just before Chancellor Rishi Sunak's call for a snap general election, which has further complicated matters since any final decision will now depend either upon Mr. Sunak’s government or a potentially incoming Labour administration post-July 4th elections. 
 
Prime Minister Boris Johnson is known for his "pragmatic and proportionate" approach towards balancing net zero emission objectives with affordable energy bills—an approach that saw him dilute several ambitious environmental goals last year. 
 
Sources close to Ms. Coutinho assert she continues to consider advice regarding proposed changes with the primary objective of keeping household bills as low as possible. 
 
Last week, Ms. Coutinho reassured the public that energy bill levies would be lower every year in the next Parliament than they were last year. Cadent's Chief Strategy and Regulation Officer, Dr. Tony Ballance, emphasized the importance of making "fair and equitable" decisions to maintain public trust in net zero initiatives. 
 
He warned against policy costs disproportionately impacting society's most vulnerable individuals. Labour Party representatives declined to comment on these proposals or potential alternatives considered by Ed Miliband, their shadow energy secretary, should they win July’s elections. DESNZ has been contacted for further comments on this matter.


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