Jim Armitage: We're warming to Ed as energy prices climb

  • @ArmitageJim

Outlook Brrr… the first chilly day of the year yesterday was possibly not the best one for SSE to raise its bills by more than 8 per cent.

Particularly from the Government's perspective, as shivering commuters grimaced at the news, warming to that pledge of Ed Miliband to cap the price hikes. The Labour plan, for all its many faults, is going down well with many voters. And, as the other energy giants follow SSE with hikes, expect the Labour leader's stock to rise ever higher, with "Britain's cost of living crisis" the refrain.

The Government, rightly, has pointed out that Mr Miliband is sounding like a 1970s socialist. But voters don't seem to care. Messrs Cameron and Osborne know they have to come up with an alternative. So there has been a flurry of talks between the Treasury and energy companies with a view to finding ways of fulfilling a pledge to cut £100 off household bills without eating into profits.

One attendee explains that voluntary long-term pledges from the companies are out of the question because they have shareholders to answer to and dividends to pay. A cut in VAT is out too, due to EU restrictions.

So, surprise surprise, it is the softest target of all that looks set to be plumped for – green investments. Highest on the list of possible price savers is the Energy Companies Obligation, or Eco (clever, huh?). This is a £1.3bn levy (£1.8bn if you believe the energy companies) on the industry to insulate the homes of people living in fuel poverty. The money has to be invested up to March 2015. The companies claim it adds about £100 to the average bill.

Ed Davey, the Lib Dem Energy Secretary, has got wind of the fact that Eco could be for the chop, and is cross about it. So now the Government is fleshing out a Third Way which could appear in the Chancellor's Autumn Statement. The Treasury and energy firms are talking about extending the length of the delivery programme of Eco to beyond 2015, thus stretching the payments burden on the firms and allowing them to lop a few quid off household bills.

I'm told to expect watering-downs or extensions of other green measures, too: the "feed-in tariffs" under which energy companies are obliged to "buy" electricity from customers generating their own leccie with solar panels. The renewables obligation and the carbon price floor tax on fossil fuels could also be cheapened for the operators.

The green lobby may howl, but the Chancellor knows that, with their fuel bills averaging nearly £1300 and no growth in their wages, many voters will deem the environment a price worth paying.