License: All rights reserved. Credit: Greenpeace

Bills explained: Five ways to cut bills and go green

Damian Kahya
Damian Kahya is the Energydesk editor
License: All rights reserved. Credit: Greenpeace

Welcome to part 2 of our bills (very) mini series. You can read part 1 - four steps to bills uproar -here but to surmise. Gas prices pushed bills up, they are set to rise and insulation will only help over the longer term, in the short term it costs money.

How can bills be frozen over the next few years? One option would be to give up and rely on coal. That assumes not only that we effectively leave the EU but that we don’t care about climate change or selling our clean tech to other countries which do, like, China

What if we wanted to freeze bills - and develop clean energy? That’s what the coalition says it is trying to do, but it seems like they need a little help from (another) list blog, so here are six ways you could do that (ps, if you don’t like list blogs, here is a proper analysis of the same).

1) Scrap or re-direct the Carbon Floor Price

Carbon taxes account for £13 of today’s bill and at least £26 of the bill in 2020. Most of this money goes straight to the taxman and could - if ministers wished - be used to fund energy efficiency (so cutting that element) or just returned to bill payers or even scrapped. The options are endless, but all of them lose the Treasury the cash. One way round  that would be to use it to stabilise bills, raising carbon levies as the gas price falls (or vice versa).

Potential savings:  £13 (2014) £26 (2020)

2) Change how the government pays for insulation

The government has two schemes to insulate homes and alleviate fuel poverty (as well as cutting carbon emissions). The Green Deal (see below) and the Energy Company Obligation (ECO). The latter has to be delivered by 2015 with energy companies set targets to insulate the homes of those at risk of fuel poverty and support more expensive insulation measures such as filling in cavities or solid walls. There will likely be another scheme after that.

There is now a row between the government and the energy companies over how much the scheme will cost consumers. One solution would be to force companies to spread the costs so that consumers don’t have to pay up-front for measures they won’t benefit from for years. Or, as deputy PM Nick Clegg has suggested, the costs could be treated as similar to other social schemes and paid through taxation.

It’s also a bit eccentric that the firms charged with reducing our energy usage are the same firms who sell us energy. Perverse incentive anyone?

Potential savings:  £40 (2014)

3) Fix the green deal

The Green Deal isn’t working. The main way to do this would be to underwrite loans at low rates of interest - something the Germans already do. Loans for the government’s Green Deal energy efficiency scheme start at around 6 or 7%.Reducing them to something closer to inflation would cut the cost to households and reduce the need to subsidise insulation measures through bills.

Potential savings: CCC argues energy efficiency could cut £110 from bills

4) Give people a stake & promote competition

Part of the uproar over bills comes from a sense that consumers are paying money for other people’s profits, be it energy companies or the firms which build wind farms and nuclear plants. One solution would be to promote investment in these projects by local authorities and consumer cooperatives - for example through a properly funded Green investment bank - with returns used to lower bills or help the fuel poor.This may prove more popular than guaranteeing loans and investments from other states.

Saving: unknown but the new Nuclear plant, Hinkley is reported to offer a 10% rate of return to investors - probably appealing to many.

5) Freeze bills or tax profits

The Labour Party’s proposal would involve forcing energy companies to buy gas and power in advance - for up to two years - and risk their profits if the price rose (or demand fell) more than they anticipated. If things go really wrong though, the cap would have to be raised.

In that respect, it’s not so different to John Major’s suggestion to introduce a windfall tax on power company profits depending on the level of the gas price.

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