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3 August 2017updated 09 Sep 2021 6:07pm

The claims green policies will add £150 to your energy bill don’t stack up

Figures from British Gas have a whiff of corporate spin and media hysteria.

By Catherine Mitchell

Just when you thought the debate over energy bills, which was such a feature of the recent general election campaign, had died down, along comes British Gas.

The energy firm sparked media outrage this week with the news that it is hiking electricity prices for over three million households by an inflation-busting 12.5 per cent, adding around £76 pounds to the average bill.

Predictably, the accusations flew. Many papers rounded on the “greed” of British Gas, noting the firm’s healthy profit margins, the highest in the sector – its average pre-tax profit margin over the last eight years is 7.0 per cent, twice the 3.4 per cent aggregate average of all big six energy firms – and the hefty salary enjoyed by Centrica boss Iain Conn.

The Government and Ofgem were also a target of anger. Ministers were criticised after backing away from pledges to cap energy bills post-election, and passing the responsibility to the regulator. Ofgem for its part batted the responsibility back, arguing that it’s not the job of the “unelected regulator” to do this, and cap would need legislation.

British Gas itself, like other big six firms that raised prices before it, sought to blame factors outside its control, notably “policy and transmission costs”, it said in a press release, explaining to journalists that “green energy subsidies” and the costs of energy networks were to blame.

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“Green tax”

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But amid all the claim and counter-claim, one report stood out: a front-page article in the Daily Telegraph, which led with the assertion from British Gas that “green tax” – funding for renewable forms of energy like wind and solar power – will add £150 to home energy bills next year.

The figure caught the eye of energy experts and journalists from other outlets; where had it come from? Admittedly, British Gas doesn’t have an unblemished record on being straight on costs (the £76 increase this week, for example, also includes the scrapping of a £15 dual fuel discount, something the firm didn’t mention in either its press release or explanatory blog), but the £150 figure seemed to have come out of the blue.

It also seemed to surprise the Department for Business, Energy and Industrial Strategy (BEIS) too, which put out a statement saying that it “did not recognise” the numbers, citing independent reports that said the true figure was lower.

A report in March by the Committee on Climate Change (CCC), for example, gave a much clearer breakdown of policy costs on bills, putting the cost of all climate policies, which might be labelled “green taxes”, at £104 in 2016, and expected to rise to £110 this year. This figure, however, excludes other policy costs, such as the costs of helping people in fuel poverty or the rollout of smart meters.

So, if you were being charitable, you might say that British Gas was rolling all policy costs into their £150 figure – but the Telegraph was clear that it referred to clean energy subsidies, and journalistic pleas to British Gas for an explanation of how they arrived at the number yielded little clarity.

Informed debate

For long-term watchers of the UK energy sector like myself, the argument over the £150 figure had the familiar whiff of corporate spin and media hysteria, which regularly combine to form a toxic cloud on energy issues, obscuring the facts and ignoring the important issues.

For example, one vital fact left out of much of the media coverage, and certainly ignored by the Daily Telegraph, was detailed analysis earlier this year by the CCC of the long-term impact of climate policies on energy bills.

The Committee found that, although support for low-carbon policies does add costs to bills, these have been more than offset by savings delivered by those same policies. Overall, said the CCC, improvements in energy efficiency and cutting energy waste has saved households an average of £290 a year since 2008.

In other words, Britain’s efforts to decarbonise, which enjoy cross-party political support, have been very successful at both cutting emissions and saving people money. They also enjoy strong popular support too; a regular Government survey, published this week, showed that support for renewable forms of energy remains high, with around 75-80 per cent of people saying that they support its use, with very few opposed.

In other words; politicians and the public want to see the development of a cleaner, more efficient energy system and, although there remain differences of opinion over specific aspects of energy policy, the direction of travel is clear.

But resolving those differences of opinion is made much more challenging by efforts to muddy the debate. Investing in the energy system of the future, while keeping bills manageable, maintaining energy security and cutting carbon emissions, is a complex task which in a democracy deserves and needs a public debate.

But this debate most be informed by clear and honest evidence; when energy market incumbents like British Gas play fast and loose with the facts for their own advantage, and journalists fail to properly question them, their customers are misled and the job of managing the energy transition becomes that much harder.

Catherine Mitchell is Professor of Energy Policy at Exeter University