The bosses of two energy suppliers have called for the government to scrap the green levies that are currently placed on energy bills.
At present, about 12% of an energy bill set at the level of the price cap goes towards funding green energy programmes, such as support for low-carbon electricity generation. However, with the cost of energy soaring rapidly due to rising wholesale prices, increased demand for energy in Asia and a summer with little wind, costs faced by customers and suppliers alike have skyrocketed.
As a result, the bosses of Ecotricity and Centrica have called on the government to remove green levies from energy bills. The founder of Ecotricity has described the levies as a ‘stealth tax’ that costs customers hundreds of pounds a year, while Centrica’s boss is urging the government to fund green programmes through general taxation instead.
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.”
How will green levies affect future energy bills?
In April, the energy price cap is set to increase once again. Although it’s currently unclear how much it will increase by, some estimates suggest that it could rise by as much as 40%.
The boss of Ecotricity believes that prices could be forced higher because of the green levies applied to bills. Speaking on the subject, he said “that's about half of the rise that’s coming through the price cap. [The government] could take that away in a flash”.
Similarly, Centrica’s chief executive Chris O’Shea suggested that the government should fund programmes through general taxation instead. Mr O’Shea argued the move would reduce annual bills by £170 and spread the cost more fairly. He also called on the government to consider suspending VAT on energy bills to help struggling households.
Will the government step in?
The government is currently looking at ways that it can support struggling households with their energy bills. However, the removal of VAT or green levies does not appear likely. Instead, the government is allegedly looking at providing targeted financial support for fuel bills in the form of an expanded Warm Home Discount Scheme.
Speaking about this possibility, Small Business Minister Paul Scully told the BBC: “We'll always look at what we can do, especially for targeted approaches, to support the lowest-paid because there is a wider cost-of-living issue.”
If you’re interested in lowering your fuel bills, unfortunately now is not the right time to run an energy comparison. This is because the best energy deals from the country’s best energy suppliers cannot beat the price cap. However, there are several schemes in place that can help you, such as the Warm Home Discount Scheme and the £500m Household Support Fund. This sees local councils distribute grants to struggling households in England.
