Use Crown Estate windfall to support fuel-poor households, Energy UK urges

The Treasury should use the Crown Estate’s £500 million annual offshore wind licensing profits to implement its all but abandoned pledge to support fuel poor households, Energy UK has urged.

The industry umbrella group calls for the development of a framework to provide longer-term expanded support to vulnerable customers, within its submission for the Budget, which Chancellor of the Exchequer Jeremy Hunt is due to present on 7 March.

It says such targeted support will be required for the millions of households for who will be unable to afford energy bills forecast to remain higher than historic levels for the rest of this decade.

Energy UK says it is highly concerned that the government has “all but abandoned” Hunt’s pledge in his 2022 Autumn Statement to implement an enduring support mechanism from April 2024 for the most vulnerable households.

It says expanded support should be delivered through taxation because the existing system of cross-subsidy is likely to “simply move pressures from one group of customers to another”.

The government should explore other revenue streams to finance this, such as the additional £500 million per year of Crown Estate profits that the Treasury is temporarily receiving from the Offshore Wind Licensing Round 4 Option Fees, which are paid by renewable developers and ultimately, therefore, energy customers.

Meanwhile moving environmental and social levies, such as the Energy Company Obligation (ECO) to general taxation, would instantly reduce household customers’ energy bills by around £113, according to the submission.

Energy UK says the Treasury could generate further revenue by linking the UK and the less volatile EU Emissions Trading Schemes.

Among its other recommendations, Energy UK’s submission calls for the end of the “no-driveway penalty” for charging electric vehicles.

It recommends aligning the 20% VAT rate for public chargers with the 5% rate at private domestic chargepoints.

These rates should be aligned alongside moves to press ahead with the deployment of the £900 million Rapid Charging Fund to deliver rapid chargers across the country.

The submission also calls for the Treasury to maximise capacity from future Contract for Difference (CfD) Allocation Rounds by addressing issues with the scheme’s design.

It says assumed CfD reference prices continue to be considerably lower than the industry’s, while load factors are significantly higher, especially for offshore wind, holding back potential take up of the renewable energy support mechanism.