Green levies on energy bills hit poor hardest, say MPs 

Ministers were last night criticised for funding billions of pounds-worth of green schemes and climate change programmes through levies on household gas and electricity bills rather than recouping the money directly from taxpayers.

A hard-hitting report said the “regressive” tactic was placing a huge burden on vulnerable customers, such as the elderly and low income families, and that raising the money through tax was more equitable, as it would be based on an individual’s ability to pay.

The blast comes just days before British Gas-owner Centrica is expected to warn that it will have to raise bills for millions, because of rising wholesale energy prices and the huge cost of paying for the Government’s renewable revolution.

In its report, the Commons Energy Climate Change Committee said environmental charges account for 9pc of everyone’s gas and electricity bill, regardless of their income.

The Government’s own estimates are that its policies will add 33pc to the average electricity price paid by households in 2020.

The Committee said: “The use of levies on bills to fund social and environmental programmes will add to the burden faced by energy bills payers, particularly in low-income households.

“Public spending is less regressive in this respect. If Government is to continue raising levies in this way, it must ensure that the public understands the different components of an energy bill and how these relate to costs.”

The report claims consumers foot the £700m cost of the EU Emissions Trading System, the £2.2bn cost of the Renewables Obligation as well as the £196m that is spent on feed-in tariffs for small-scale renewables.

Watchdogs believe most households have no idea they are paying for such schemes while energy execs are furious they continue to be blamed for rising bills when ever more Government costs are being passed onto homeowners. One source said: “Labour started it, thinking it was a good idea to recoup the money through bills as it was less obvious, but it’s just carried on since then.”

Scottish Power last week said the cost of implementing green schemes such as a new carbon tax, fitting solid wall insulation and wind farm subsidies had soared by nearly 140pc in the past year. Keith Anderson, Scottish Power’s chief executive, said: “We are seeing a big increase in our costs. What we are seeing coming through is in line with what we predicted, not what the Government predicted.”

Energy minister Ed Davey insists household bills will fall over time, as homes become more energy efficient, through insulation or ‘greener’ products such as washing machines. The claim has been largely ridiculed by City analysts and stockbrokers.

The Select Committee insists the Government should do more to tackle fuel poverty, but is also scathing at the lack of transparency on household bills and the efforts of Ofgem, the industry regulator, to force the ‘Big Six’ energy suppliers to do more.

The Committee said it was “astonishing” Ofgem had not taken up the recommendations of accountants BDO, which suggested measures such as forcing each of the Big Six to report accounts to the same year end and simplify bills in a bid to improve transparency. It said the failure “lays Ofgem open to criticism that it is unwilling to use the teeth it has.”

Speaking last night, Richard Lloyd, exec director of Which? said: “The reality is that consumers are going to foot the bill for upgrading our energy infrastructure. Whichever way it’s funded – tax or bill levies – the Government must work with industry and regulators to ensure there is proper scrutiny and transparency.”

A spokesman for the Department for Energy and Climate Change insisted the Government was doing “all we can” to help consumers “keep their bills down”.

He added: “Our policies to support renewable energy and reduce energy waste are insulating consumers from the rising cost of fossil fuels.”