Green levies should be added to bills for energy companies

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Two energy companies’ bosses are calling for the removal of green levies from bills in order to assist customers who face higher prices.

Ecotricity’s founder described its levies on energy bills in the following way: “Stealth tax”, a collection of hundreds of pounds per year.

Centrica’s boss wants government to instead fund green programs via general taxation.

In the last few months, thousands of homeowners have noticed an increase in their energy costs.

Suppliers and customers are now facing rising costs due to spiralling wholesale gas prices and increased energy demand in Asia.

Dale Vince, the chief executive of green energy firm Ecotricity, told the BBC’s Wake up to Money programme: “The government talk about high energy prices and bemoan them… but what they don’t talk about is the fact they take £9bn a year from our energy bills in a combination of VAT and about five social and environmental policies.”

Currently, about 12% of an energy bill set at the level of the Energy Price Cap of £1,277 goes towards funding green energy programmes, such as support for low-carbon electricity generation.

After an Ofgem review, the price cap is set to increase in April. It determines the annual maximum that a supplier can charge on a dual-fuel tariff in England, Scotland, and Wales.

Vince said that green levies on bills could cause prices to rise.

“This is only about half of what’s going through the price cap. [The government]He said that he could remove it in a snap.”

Chris O’Shea, chief executive of Centrica, suggested in The Sun that one approach to moving forward was to eliminate the social and environmental levies from energy bills. Instead, he proposed “funding ‘green’ programs through general taxes.”

Mr O’Shea argued the move would reduce annual bills by £170 and spread the cost more fairly.

To help households in need, he also asked the government for a suspension of VAT on energy bills.

Torsten Bell (chief executive at the Resolution Foundation think-tank) suggested that suspending VAT might make a small dent to rising costs but it may not prove as beneficial as it would be for higher-earners.

“The most important thing is that our intervention targets lower-income households.” he stated.

Tax on windfalls

Vince, Ecotricity’s boss suggested North Sea suppliers of gas should be subject to a windfall income tax because some have had their profits rise as wholesale prices have soared.

According to experts at energy consultancy Wood MacKenzie, UK North Sea oil and gas companies are set to report near-record cashflows of nearly £14.9bn for the current financial year.

According to Mr Vince, “The North Sea operators are making a killing this year,” he told BBC.

A windfall tax is fair, North Sea operators don’t need the money, were not planning to have it, and there is a hole in the economy elsewhere.

  • The energy boss doesn’t know the exact amount of high-end bills that will be incurred.
  • Why is gas so expensive?
  • The industry predicts that energy costs will increase by half

Other energy executives, including Stephen Fitzpatrick (Ovo Energy chief executive), predicted last month that rising wholesale gas prices would cause a “great crisis” for 2022.

Energy UK, the trade association representing the sector, warned that bills could rise by 50% more unless government intervention is taken.

Although the government is considering a variety of options, the idea of providing targeted financial assistance for fuel bills (similar to the Warm Home Discount) has emerged as the most promising option in the fight against rising prices.

The current scheme offers those receiving certain state benefits the option to apply for a one-off £140 payment every winter.

The eligibility criteria could be increased, and this could lead to a wider range of applicants.

Paul Scully, Minister for Small Business, told BBC Today that “we’ll always consider what we can do to support those lowest-paid, because there’s an even wider cost-of living issue.”

According to a spokesperson for Department for Business, the existing energy price caps “insulate millions of consumers against high gas prices around the world”.

“We will listen to businesses and consumers on ways to reduce energy prices.”

The department also pointed to schemes currently in place to help those facing high bills, such as the Warm Home Discount scheme, as well as the £500m Household Support Fund, which sees local councils distribute grants to struggling households in England.


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