Customers should get winter ‘break’ from levies on energy bills

The government should give energy customers a “break” by taking levies off their bills for the winter, the co-author of the 2019 Conservatives’ election-winning manifesto has said.

Rachel Woolf told a fringe event at the Tory conference in Manchester on Tuesday (5 October), organised by Energy UK, that temporary relief from policy costs could help households struggling to cope with rising prices.

“I would remove levies from electricity and give people a break for the winter and then put a carbon price across electricity and gas,” said Woolf, founding partner of the agency Public First, which recently published a report calling for levy costs to be switched from electricity to gas in order to encourage customers to switch to lower carbon heating options, like heat pumps.

She also said the government’s headline message on the transition to net zero is correct but it is facing more of a challenge to deliver policy in the area.

“Messaging on this is right. This is not a messaging but a policy and implementation problem. Delivery is the core issue rather than the message.”

But given that gas boilers do not have to be replaced “immediately”, Woolf said achieving a transition to lower carbon heating is “not impossible with the right incentives”.

Emma Pinchbeck, chief executive of Energy UK, told the meeting that transferring policy levies from electricity to gas would be “difficult” against the backdrop of rising energy bills.

She said that Energy UK’s preferred option would be to switch policy costs, like Renewables Obligation payments, to general taxation but that this could be achieved in a staggered way.

At a later meeting, organised by the Conservative Environment Network and Smart Energy GB, Pinchbeck said Energy UK does not back an immediate scrapping of the price cap despite the added pressures it is imposing on suppliers’ finances.

“We are keen to see the price cap stay for a period: right now, it’s insulating the people worst hit by the price spike.

“We want to keep status quo as much as possible.”

But she said that once the current cost crisis is over, the government should undertake a root and branch reform of the retail market, adding that its recently consulted on proposals to introduce auto-switching are “not fit for purpose”.

Pinchbeck also said that in order to deliver changes to “slow moving regulatory processes”, like the planning system, Energy UK would like an energy bill “as soon as possible”.

The government recognises that the levies on electricity bills are an issue, energy minister Lord Callanan said: “It is demonstrably true that gas is relatively cheap compared to electricity: we recognise that in government.”

But the Treasury is in charge of decisions on the issue, he said: “These things are a matter for the chancellor although it is no secret that the Treasury were looking at extending the ETS (emissions trading system) to gas.”

Hannah Dillon, head of the Zero Carbon Campaign, said it was “quite striking” that there was “very little mention of climate change in chancellor Rishi Sunak’s s keynote speech at the conference on Monday.

She said: “The government needs to start putting its money where its mouth is in relation to the net zero target. At the moment, it’s essentially a middle-class privilege to be able to afford to take any action on climate change.”