License: All rights reserved. Credit: Greenpeace

How a Tax Payers Alliance conspiracy theory will push up your fuel bill - according to the Mail and Telegraph

Damian Kahya
Damian Kahya is a former BBC energy reporter and Energydesk editor
License: All rights reserved. Credit: Steve Morgan / Greenpeace

Gas bills to heat your home will rise by around £250 in seven years as part of a government scheme to ensure they keep pace with the rising cost of electricity.

That is the almost entirely evidence-free claim made by the TaxPayers' Alliance (TPA) and sold to The Mail and The Telegraph. 

The stories claimed duel fuel bills were set to rise by over £400 in 7 years due to green measures, and would reach almost £3,000 by 2030. 

The theory on gas bills - which goes completely unexplained in the TPA's release - is now part of the basis for a national campaign and online energy bill calculator.

It's completely ridiculous and has no basis in fact -Dr Rob Gross

The tool is designed to encourage consumers to write to their MP with fears about rising bills.

 The TPA research claimed that electricity bills would rise by 29% between now and 2020 due to green measures, and 100% by 2030 - based on a report by Liberum Capital.

But electricity accounts for less than half the average dual fuel bill - which is mostly the cost of gas for heating.

See also

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So researchers at the TPA decided to assume that gas bills would rise by the same amount -  exactly 29% to 2020 and 100% by 2030.

This is very odd.

Whilst money for energy saving, such as home insulation, can be added to gas bills, the costs of decarbonising the electricity system, or new fossil fuel power plants, apply only to electricity bills. 

Tax payer alliance fact-check

Energydesk contacted the TPA to ask how they'd worked this out. Their response is somewhat confusing, so we'll try to explain and verify as we go:

"The Liberum report is about electricity," said Robert Oxley from the TPA.

"But the government cannot allow a dramatic rise in electricity costs relative to gas costs. They need to electrify the network to meet their decarbonisation objectives and that will not happen if people see their electricity bills rise but not their gas bills."

So what they are saying here is that the government wants gas bills to be high because otherwise people will revolt against rising electricity bills to pay for clean energy. If this were true, it would be the story of the century and act of political self-destruction on an epic scale. But it's not. 

"There are a series of policies that the government already use, and will continue to use, to increase gas bills so that they keep up with electricity bills."

We have no idea what these 'policies' would be. Perhaps they mean measures to pay for the roll out of home insulation?

According to Ofgem, who are linked to from TPA's press release, these account for about 6% of the total gas bill - around £50. By 2020 the government's independent climate advisors expect this number to fall. That is to say, these policies will not put up gas bills. Actually they will lower them. 

Never mind, the response goes on:

"I do not think that the government can afford a big rise in domestic electricity prices and stable domestic gas prices when the two commodities are substitutes."

This isn't true - you can't power your lights with your gas boiler. But even if it were true, this hypothesis is bonkers.

"In practical terms there are a number of policies that aim to achieve a balance between the two, like the Climate Change Levy, which was always carefully calibrated to treat different sources of energy equally."

Oh. So they didn't mean home insulation. The Climate Change Levy, for what it's worth, applies only to businesses, not domestic consumers. Again, never mind.

"If they are serious about meeting their current policy the targets the premise of all of our analysis - I think they need to ensure that domestic gas moves in line with domestic electricity."

Ok, we're back with the conspiracy. Here is a response from Dr Rob Gross from Imperial University:

"Not only is domestic gas unaffected by power sector policies but currently qualifies for VAT at a reduced rate.The assumption that gas prices move in tandem with power prices as a result of policies in the power sector is inaccurate, inappropriate and quite bizarre.It's completely ridiculous and has no basis in fact."

But here is the oddest thing.

Most people, including The Committee on Climate Change and The Government and The CBI say gas prices have risen (driving up bills) and will probably rise more. But they do not predict they'll rise because of a conspiracy to ensure they keep pace with green energy.

They predict they'll rise because gas is getting more expensive. In fact, that tends to be cited as a reason to use green energy - so as to protect consumers from rising gas prices.

If, as some others predict, gas prices do not rise, then the pressure on consumers paying a gas and electricity bill will be reduced. In other words, they will be more able to afford any increases in their electricity bills. 

In short, the claim made by the TaxPayers' Alliance - which underlay two national stories and a parliamentary campaign - has no evidence to support it at all.

A note on the Liberum report

When contacted by Energydesk the author of the report, Peter Atherton, wouldn't be drawn on the TPA's methodology as regards gas.

His report, he said, is aimed at institutional investors and designed to highlight risks in energy policy, including a back-lash by consumers if bills rise.

So does the report show electricity bills are set to rocket due to clean energy?

The first thing to note is that the Liberum study has no counter-factual. It doesn't say bills will rise more with clean energy than gas.

Instead it focuses on just one side of the coin - the side of interest to investors.

The report assumes the cost of meeting the government's renewable energy targets will add 29% to bills by 2020.

That's 10% more than the government's independent advisors, The Committee on Climate Change (CCC). What's the difference?

The CCC use figures already agreed by ministers for spending on clean energy between now and 2020. Liberum uses higher figures from its own analysis.

Its figures are comparable to the inflation adjusted total from the CCC, so perhaps they mean bills will rise by 29%, including inflation.

Beyond 2020, the gulf between Liberum's view and the view of the government's independent advisors becomes a chasm.

The CCC argues that because the costs of clean energy fall over time clean energy investments will add just £20 to bills between 2020 and 2030.

Indeed, because of the rising cost of gas and the government's planned increases in the price of carbon, the think tank the IPPR estimates that bills will be more or less identical in 2030, whether we pursue a zero carbon or gas rich policy - and that's assuming we use only renewable energy.

Abandoning the carbon price would change that equation - but it may also require leaving the European Union and its carbon trading scheme. 

Liberum, by contrast, argues bills will double on today's levels a rise of £300 more than the CCC. They don't explain what would happen if we stuck with gas.

The difference between them and almost everyone else is hard to explain because the numbers are so hypothetical but, again, Liberum appears to think gas will be cheaper in the future and everything else far more expensive to build.

A CCC spokesperson told us "this assumes very high costs which have no basis in evidence, and is therefore not credible". Mr Atherton disagrees.

But Liberum also make numerous other assumptions for which we can't find sources.

These include: a £2.4bn yearly payment to run idle gas plants as backup; £4bn to upgrade the grid (again yearly); an assumption that nuclear will always be £20-£40/Mwh more expensive than gas (no matter the cost of gas), and lack of clarity over whether their figures are inflation adjusted or not.

We wrote to Mr Atherton on these other questions but he, perhaps understandably, didn't want to engage in a debate triggered by the TaxPayers' Alliance. Still, it does leave us somewhat confused.

On the issue of grid costs, the Electricity Network Strategy Group - which includes the National Grid - has recently estimated the total cost of transmission upgrades at £8.8bn. But that’s the total cost, not the yearly cost. Spread out over the lifetime of the infrastructure and applied to consumer bills, it would add about £6.

If you add £4bn a year though, it works out more like £153 a household - it's easy to see how you can get much higher figures by changing a few yearly costs in billions.

Nobody - so far as we can tell - has estimated a cost for the capacity payment anywhere near the one Liberum appears to think we'll need.

The Liberum report does carry out one comparison.

It contrasts the capital costs of decarbonising with simply upgrading our power network without regard to climate change.

That allows the TPA to say that upgrading our power network will cost £376bn between now and 2030, nearly double the fossil fuel-only option. 

But not only is this number higher than anyone elses (almost double the government's figures by 2020), it's also not comparing like with like.

When you invest in clean energy you no longer need fuel and you don't need to pay a carbon cost - so these costs must be added to the capital costs of fossil fuels.

When the CCC did this it worked out that in the long term - through to 2050 - clean energy was far cheaper.

In short, does the report substantiate at least the electricity part of the Tax Payers Alliance claims? Only if you believe its assumptions (as ever).

If Liberum do publish their answers to our questions, we'll get back to you.