Household energy bills will rise by more than £300 a year as a result of the Coalition’s green policies, a senior Downing Street adviser has told David Cameron.
Rising energy bills represent a problem for the Coalition at a time when wages are being squeezed and inflation is high
The Prime Minister has been warned that government plans to get people to reduce their bills through efficiency measures are likely to fail.
Mr Cameron’s senior energy adviser pours scorn on claims by Chris Huhne, the Energy Secretary, that rises in gas and oil prices will be offset by people using less power. A note by the adviser describes his department’s analysis as “unconvincing”.
It warns that the Government’s move to increased nuclear power, wind turbines and other measures will add 30 per cent to the average family’s annual energy bill of £1,069 by the end of the decade.
Mr Cameron is said to be “very worried” about the figures in the paper, written by Ben Moxham, his senior energy adviser who was recently brought in to beef up the Prime Minister’s policy unit.
The private note, seen by The Daily Telegraph, is titled “Impact of our energy and climate policies on consumer energy bills”. It was sent to Mr Cameron and offers a blunt assessment of how Coalition energy plans, in particular a series of green policies, will affect householders.
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It concludes: “Over time it is clear that the impact of our policies on consumer bills will become significantly greater.”
Rising energy bills represent a problem for the Coalition at a time when wages are being squeezed and inflation is high.
Mr Cameron has vowed to bring down energy prices by giving the regulator Ofgem tougher powers, but this year he has had to watch as energy companies increase their prices.
The disclosure that Mr Cameron’s own policies are likely to add “significantly” to the burden on householders will anger voters. Just two months ago, Mr Huhne described calculations by researchers at Cambridge University that the Coalition’s reforms would increase bills by 32 per cent as “rubbish”.
The six-page document, dated July 29, says: “DECC’s [Department of Energy and Climate Change] mid-case gas price scenario sees policies adding 30 per cent to consumer energy bills by 2020.”
The report then identifies four policies that it says will increase bills, including the Government’s demand for energy to come from more renewable sources and the plan to guarantee power companies a fixed price for electricity if they use low carbon methods to generate it. The paper, addressed to the Prime Minister, is copied to just 12 of his No 10 aides, including Jeremy Heywood, his permanent secretary, Ed Llewellyn, his chief of staff, Steve Hilton, his closest policy adviser, and Andrew Cooper, his pollster.
There is growing concern about the issue. Ministers and officials from the Treasury, DECC and the Department for Communities and Local Government, are now expected to be called into No 10 for a high-level meeting to discuss how to pursue the policies.
Mr Moxham used to work for BP and more recently was employed by a private equity group specialising in oil and renewable energy run by Lord Browne, the former BP chairman. His note to the Prime Minister casts extensive doubt on claims by those Cabinet ministers behind the climate change policies.
Some ministers, including Mr Huhne, have suggested that consumers will change their habits, opting for better home insulation to offset rises in prices.
Mr Moxham says DECC analysis predicts “the impact of our policies on household electricity bills would be lower due to the effect of other policies, notably energy efficiency measures, in lowering electricity consumption”.
However, Mr Cameron’s energy adviser writes: “We find the scale of household energy consumption savings calculated by DECC to be unconvincing.
“Their analysis may be based on the assumption that many energy efficiency measures will be taken up without subsidy, whereas we believe a large number of measures will need to be subsidised, given the hassle factor and other barriers to consumer uptake.”
Mr Cameron is told that there are now “a number of questions” that arise.
They include whether green policy can be designed better to counteract the “uncertainty and unpredictability” of future gas prices. And whether “we can go further on consumer energy efficiency to offset energy price rises, and if so how?”
Intriguingly, the possibility of reversing some policies is also raised.
Mr Moxham asks: “Can we open some of our policies?” He goes on to suggest looking at the high-cost technologies such as offshore wind turbines, “in a way that minimises cost and disruption to investment”.
The paper was written after Mr Cameron held a seminar recently on “Green Deal implementation” – his drive to improve energy efficiency within households and businesses.
The purpose of that No10 meeting was to discuss the impact of energy and climate change policies.
It was also supposed to examine “what can be done to minimise consumer bill increases in the short and medium term”.
That effort is now likely to be intensified as households face sharp rises in their energy bills.
Five of the “big six” providers have in recent months announced price rises of as much as 24 per cent.
The latest was Npower which said the tariffs for gas would increase by 15.7 per cent and the price of electricity would rise by 7.2 per cent from Oct 1. The sixth firm, EDF, is yet to announce changes.