Energy: Levies

House of Lords written question – answered on 25th October 2011.

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Photo of Lord Vinson Lord Vinson Conservative

To ask Her Majesty's Government what the total cost to the consumer has been to date of energy and environment policies that are funded by levies on energy companies; and what each of those levy-funded policies has cost.

Photo of Lord Marland Lord Marland The Parliamentary Under-Secretary of State for Energy and Climate Change

Levy-funded policies, such as the renewables obligation (RO), feed-in tariffs (FiTs), energy efficiency commitment (EEC), carbon emissions reduction target (CERT) and Community Energy Saving Programme (CESP), place the obligation of financing the policies on energy companies which is then passed onto the consumer through their energy bills. To help ensure that policies achieve their objectives cost effectively and affordably the Government introduced a framework to control levy funded spending by DECC at Budget 2011. This framework, covering FiTs and the renewables obligation, forms part of the Government's public spending framework which Treasury has responsibility for.

The total cost of each policy to date and the average cost to households to date are shown in the following table. EEC I and EEC II costs are based on evaluations of the policies, CERT costs are based on impact assessments conducted before the policies were enacted and RO and FiTs costs are based on reports published by Ofgem.

Policy Time period considered Estimated cost to date (£bn, Real 2010-11 Prices) Estimated average cost to date to household (£, Real 2010-11 Prices)
Energy Efficiency Commitment (EEC) I April 2002-March 20050 0.5i 21
Energy Efficiency Commitment (EEC) II April 2005-March 2008 1.0 41
Carbon Emissions Reduction Target (CERT) April 2008-March 2011 3.3ii 127
Carbon Emissions Reduction Target (CERT) Extension* April2011-October 2011 0.6 22
Community Energy Saving Programme* (CESP) September 2009-October 2011 0.2 7.9
Feed in Tariffs Tar(FiTs)* April 2010-July 2011 0.02iii 0.3
Renewables Obligation* (RO) April 2002-March 2011 7.31 iv 103

To meet our environmental targets and ensure secure energy supplies there is an investment challenge in the energy sector that must be tackled. The Government's task is to overcome this at least cost to the consumer. Improving energy efficiency will be crucial in meeting our targets and helping consumers save money on their bills. The above figures do not account for the direct benefits to households from these policies-e.g. energy efficiency savings and improvements in comfort as a result of EEC, CERT and CESP and electricity cost savings and tariff payments from taking part in the FiT scheme.

DECC published an assessment of the impact of climate change and energy polices on energy prices and bills for households and non-domestic consumers alongside the July 2010 Annual Energy Statement. This analysis estimated that energy and climate change policies added around 4 per cent to the average household energy bill in 2011 (compared to what their bills would have been in 2011 in the absence of policies)v. An updated assessment of the impact of energy and climate change policies on energy prices and bills for households and businesses and bills will be published shortly.

* Policies active i Calculations of EEC I, EEC 11, are based on an evaluation of costs by Eoin Lees Energy. Available at http://eoinleesenergy.com/ ii Calculations of CERT and CERT Extension are based on Impact Assessments published by DECC iii Ofgem Feed in Tariff Newsletters: http://www.ofgem.gov.uk/Sustainability/Environment/fits/Newsletter/Pages/Newsletter .aspx iv Based on Ofgem total ROC/annum and buyout price. Admin costs included in buyout fund post 2009-10 only. v DECC, Estimated impacts of energy and climate change policies on energy prices and bills http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/price_bill_imp/price_bill_imp.aspx

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