The painful truth: Energy bills will keep rising, whatever politicians say

It is time to end the fiction that energy bills can be brought down by fiat

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The Independent Online

It is rapidly becoming a truism that Britain’s energy prices are unnecessarily high and that it is within the gift of politicians to bring them down. Neither suggestion is correct, however, rendering much of the debate about household bills unhelpfully detached from reality.

The most recent offender was Ed Miliband, with his party conference promise to freeze bills for 20 months if he wins the next election. For all its superficial appeal, the scheme is woefully wrongheaded. It will likely have little effect, merely boosting prices before and after the freeze. Worse, the prospect of government caprice threatens much-needed investment in the sector. Talk of the lights going out may be a touch histrionic. But a fifth of our generating capacity is to close over the coming decade and some £110bn is needed to plug the gap. Mr Miliband’s posturing just upped investors’ prices – and that means higher bills, not lower ones.

The Labour leader’s populist spasm also wilfully ignores the green agenda that his own government was so instrumental in setting. Not only can energy companies not justifiably be charged with profiteering; their margins are too low and their investment commitments too high. But the fastest-rising part of bills in recent years has been the environmental levies to pay for (costlier) carbon-free power generation and energy efficiency schemes.

As concerning as Mr Miliband’s lapse of understanding of the energy market is the gift that he has given to sceptical Tories long keen to water down carbon-reduction plans. Given the menace of climate change, green charges on bills are no luxury. But the Chancellor wants to crimp them so he can trump Labour’s bills pledge in his Autumn Statement. It can only be hoped that the Energy Secretary stays his hand. A recent warning that bills will soar by another 20 per cent by 2020, partly thanks to green costs, will not help, though.

True, the Energy Companies Obligation and other efficiency programmes are far from perfect. But to suggest they can simply be abandoned is no less of a sleight of hand than is Mr Miliband’s price controls, and the result would be equally catastrophic.

It is time to end the fiction that energy bills can be brought down by fiat. They cannot. A growing population, living ever more energy-intensive lives, supplied by an ageing infrastructure that must be replaced by new green technologies, means higher bills. The only way to limit the impact is to reduce the amount of power we use. Yet the government scheme to help the poorest save energy is of questionable cost-effectiveness; and, as we report today, the Green Deal to finance insulation and the like through future bills is over-complex and under-subscribed.

It is here that attention must be focused, not on the hot air of politicians hustling for short-term advantage. Draught-proofing and double-glazing may not be sexy, but they are the only way to make a difference without sacrificing the future.