Who to believe on the future of energy bills?

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The Energy Secretary wants you to believe that although he is asking you to pay nearly £100 more a year for your energy by 2020, bills will actually come down in the long term, because we will be using energy more efficiently. The Climate Change Committee, an expert group that advises the government, expects that the cost will add £110 to the bill. Other analysts suggest the increase could be even higher, nearly £180. So, what should you believe?

Well, for the government's long term ambition of bringing bills down to come true, we all have to get a lot better at turning the heating down, insulating our lofts and using energy more efficiently. To say that industry experts are skeptical of how much this could cut energy use is a serious understatement.

One told me the government's hope is a 'heroic assumption'. Another said the argument is based on figures that are something far too rude for me to write in this blog. You would therefore be right to be cautious about making the assumption that bills will come down. (Not withstanding the fact that the biggest things you can do to cut your costs is insulate your house better and make the effort to switch deal or provider).

Energy bills are set to rise by nearly £100 a year by 2020.
Energy bills are set to rise by nearly £100 a year by 2020. Credit: Press Assocation

What we do know is that the whacking great sum of nearly £8billion that will go to new, cleaner power stations, will be passed on to consumers, and it will add roughly a £100 to bills every year by 2020. But we all really care about is the total price we have to pay and this great chunk of cash is not the only element of the bill.

Given all the costs, the increases on your bill over the next few years may be far greater than this additional levy. I've just seen research from Credit Suisse which suggests that over the next five years, even before the government levy ramps up to nearly £8billion, prices will rise at around 10 per cent a year. That means potentially by 2017/18, the average dual fuel bill could hit £2,000. Quite a prospect.

It is important though to emphasise just how uncertain this all is. Back in 2009 Ofgem, the regulator, estimated that prices would increase by between 25% and 60%. That is a massive difference in the extent of the increase, but the direction is certainly clear. Despite the government's optimistic assertions, it seems bills are only going one way.