An independent report examining the costs of the Government's new energy efficiency programme, the Energy Company Obligation (ECO) scheme, has found it could add £94 to consumer energy bills next year.
The Energy UK report's findings also revealed that the cost of the Department of Energy and Climate Change's energy model is significantly greater than was originally estimated.
The industry has long been concerned that the Department of Energy and Climate Change had underestimated the costs of its new ECO scheme. This independent report by NERA supports our fears as it shows when the right numbers are put in, the cost to households doubles or more. This has to be sorted out now and we are calling on Government to work with us so that customers get the insulation they need in a sensible and cost-effective way. We have also written to consumer groups asking them to come and discuss these findings and help with the solution.
Energy regulator Ofgem has welcomed the Government's energy bill plans, but warned the industry faces an "unprecedented challenge" ahead.
In a statement, the regulator's Senior Partner for Markets, Andrew Wright said:
Ofgem welcomes today’s announcement by DECC on the future of energy policy. We will continue to work constructively with Government to get the best outcome for consumers both now and in the future.
Ofgem has played a key role in advising consumers and Government of the challenges Britain faces in attracting significant investment. In 2009 Project Discovery warned consumers that Britain’s energy industry faced an unprecedented challenge and concluded that changes to the current energy arrangements would be needed to deliver secure and sustainable energy supplies.
The Energy Bill is set to cost households an extra £100 a year by the end of the decade. The government says the cost is justified because clean power stations will help tackle climate change and create jobs.
ITV News' Consumer Editor Chris Choi reports.
Labour leader Ed Miliband said the government made the wrong decision in not setting a target to cut emissions by 2030.
Energy Secretary Ed Davey has claimed that adding around £100 to annual household energy bills by 2020 will reduce costs in the long term, but this was described by an industry insider as an "heroic assumption", ITV Business Editor Laura Kuenssberg said.
Another industry source cast doubt on the government's assumption that energy efficiency will offset increasing costs.
Energy Secretary Ed Davey told ITV Business Editor Laura Kuenssberg that consumers will be paying more for energy in eight years time, but said that those increases will eventually lead to bill reductions.
The CBI welcomed the Government's energy plans, but warned that vulnerable consumers should be protected from price hikes.
Its Director-General, John Cridland, said: “This package will send a strong signal to investors that the Government is serious about providing firms with the certainty they need to invest in affordable secure low-carbon energy.
“We now have political agreement on this critical issue and the Government should get the bill on the statute books as quickly as possible.
“As more details emerge, the Government should ensure that those households and businesses most vulnerable to increased energy prices are protected.”
A new energy-efficient electricity infrastructure will create "a massive increase in jobs" now, while the impact on household bills will rise gradually, Energy Secretary Ed Davey told ITV Business Editor Laura Kuenssberg.
The Liberal Democrat MP said that the average consumer is currently paying 2% of their energy bill to supporting clean energy and this will rise to 7% by the end of this decade, but this increase will pay for a system that will actually reduce energy bills in the long term.
"We think [the rise will be] slightly under a £100 in eight years time, but the offsetting measures of things that will go the other way, and all our policies together, will mean that we think the average household will see a bill that's reduced by 7% than it otherwise would have been."
The Federation of Small Businesses has called on energy reform "to go hand in hand with radical changes in the retail energy markets" to deliver tighter regulation of the "big six" energy companies.
While we welcome the much needed certainty the Energy Bill will give to investors to help secure the UK’s energy supply, we are concerned that small firms will be left exposed to ever increasing energy bills. The remorseless rise in energy costs is hurting not only individual businesses but also the competitiveness of the UK as a whole.