As has often been the case recently, announcements about rises in fuel bills – this time from SSE -are accompanied by much grandstanding about what and who or what is to blame.
Announcing an 8.2% rise in bills SSE’s press release went into more detail than usual blaming:
Increased costs of:
- buying energy in global markets (up 4% for a typical dual fuel customer*);
- paying to use the upgraded electricity and gas networks to deliver energy to customers (up 10%*); and
- government-imposed levies on energy bills (up 13%*).
You’d be forgiven therefore for thinking that bills rose primarily because of those pesky government imposed ‘green’ levies (though SSE refrained from branding them as such).
You’d also be mistaken, because – in pound terms – the rises don’t reflect the percentages given. A small percentage of a large amount is still bigger that a big percentage of a small amount.
Quoting the percentage increase is accurate, but on its own could lead one to draw inappropriate conclusions about the money leaving your wallet.
To see what the cost rises are, one needs to know how much each component of the bill (like the network costs) starts out as.
SSE has its own breakdown, we have our own version that breaks it down in a different way, on the basis of slightly older Ofgem numbers.
Although our breakdowns are not completely identical (which isn’t surprising as they use different figures) they do broadly agree and show that £600 or more comes from wholesale costs of energy, whilst the costs of green policies are likely to be around £100. Renewable energy is less than £30.
Reg Platt at think tank IPPR has had a look at the numbers.
In the Q&A from the SSE press release it says that average annual standard dual fuel energy bill will rise from £1,131 to £1,224, a rise of £93.
According to IPPR if you combine SSE’s percentage increases of the different component with their actual size “network charges have added around £28 to the average annual dual fuel energy bill, wholesale energy costs around £23, government schemes around £15, and VAT around £5. This leaves £23 of the rise unaccounted for, presumably in internal operating costs and profits.”
Commentary and media coverage that dwells on green levies is missing the point that most of the rise continues to come from elsewhere.
