One third of energy bills set to be green 'subsidies'

Subsidies for green initiatives could make up almost a third of the average consumer's domestic fuel bill within 15 years, the energy industry regulator has warned.

Subsidies for green initiatives could make up almost a third of the average consumer's domestic fuel bill within 15 years, the energy industry regulator has warned.

Ofgem chief executive Alistair Buchanan said this was the price that had to be paid if today's consumers wanted to leave Britain "a nicer place to live in for our children and grandchildren".

But he criticised utility companies for failing to make clear how much of customers' cash is going towards measures to cut greenhouse gas emissions, and indicated he was ready to consider making it compulsory to include the percentage figure on bills, as Centrica already does.

While bills a decade ago did not include any subsidy for climate change schemes, the average paid by households now is around 9 per cent and can be expected to rise to well over 20 per cent by 2020 and 30 per cent by 2025, Buchanan told the House of Commons Energy and Climate Change Committee.

The cash was going towards initiatives such as the Carbon Emissions Reductions Target (CERT), Community Energy Saving Programme (CESP), the Renewables Obligation Certificate (ROC) and feed-in tariff schemes (FITs), he said.

"We are really looking at a dramatic change in your bill," said Mr Buchanan. "The majority used to be wholesale cost and next there was network cost and you had a very small subsidy. By 2025 the network charge is going to be 15% of your bill, subsidy will be 30 per cent of your bill and the rest will be wholesale.

"So it's a huge chunk of your bill driven by CERT, CESP, levies, ROC, FIT - the acronyms go on and on and it's the cumulative impact."

The Ofgem chief added: "It is going to become a very important issue in terms of communication with consumers that the 9 per cent of your bill - it was zero per cent 10 years ago, but it's 9 per cent now - that is associated with green-related projects will be well over 20 per cent by 2020 and we need to explain that so people understand."

And he said: "It is absolutely incumbent on us to represent clearly to consumers what it is costing them, so they fully understand what the cost is to make Britain a nicer place to live in for our children and grandchildren."

With a few exceptions, energy companies had been "staggeringly bad" at explaining their pricing to customers, Buchanan told the committee.

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