Basic mistakes in the design of Ed Miliband’s original scheme to encourage a new generation of offshore wind farms will cost households £17billion, MPs warn today.
In a devastating report, the Commons public accounts committee (PAC) said millions of families faced years of higher electricity bills as a result of a poorly designed scheme to link wind farms out at sea to the national grid.
The scheme was drawn up under the Labour leader during his time as Climate Change Secretary in the last government. It was then implemented by his Lib Dem successor Chris Huhne.
The report comes just days after the Daily Mail revealed Mr Miliband’s controversial scheme to encourage people to put solar panels and windmills on their roofs is set to cost families an extra £1billion in higher bills by 2015.
The committee’s Labour chairman Margaret Hodge said it was ‘shocking’ the offshore wind deals went ahead, given the billions wasted on PFI in the past.
The contracts will provide firms with inflation-proof returns lasting for 20 years. Yet if they fail to deliver they face a maximum penalty of just 10 per cent of one year’s income.
And, as with past PFI deals, firms do not have to share windfalls with the taxpayer if they able to refinance on much cheaper terms in future.
The unduly generous deals will cost consumers £17billion over the period, according to the report – or about £700 for the average family.
Mrs Hodge said: ‘Not only is it unlikely this new licensing system for bringing electricity from offshore wind farms onto the national grid will deliver any savings for consumers, it could well lead to higher prices.
‘Indeed, the terms of the transmission licences appear to have been designed almost entirely to attract investors at the expense of securing a good deal for consumers.’
The report said those involved had failed to learn lessons of costly deals in the past. Tory MP Richard Bacon, a member of the committee, said it was ‘Groundhog Day for PFI’.
The Department for Energy and Climate Change hopes offshore wind farms can provide up to 15 per cent of electricity needs by 2020.
But that will require major investment in transmission infrastructure such as platforms, cables and substations. Competition for the contracts was launched in March 2009, with the first contracts let in 2011.
Mrs Hodge said the department and the Gas and Electricity Markets Authority had wanted to create a ‘competitive market’ for offshore transmission – yet the first six licences were awarded to just two firms, Transmission Capital Partners and Macquarie.
A department spokesman said energy regulator Ofgem was looking again at terms for future contracts.
He said the scheme ‘harnesses competitive forces to drive value for money’. He added: ‘With six licences now granted, now is the right time to re-examine some of the terms.’
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