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Electricity: Billing

Energy and Climate Change written question – answered on 19th June 2012.

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Photo of Chris Heaton-Harris Chris Heaton-Harris Conservative, Daventry

To ask the Secretary of State for Energy and Climate Change what estimate his Department made of the effect of renewables on households' electricity bills (a) in November 2011 and (b) in the most recent period for which figures are available.

Photo of Charles Hendry Charles Hendry The Minister of State, Department of Energy and Climate Change

The Renewables Obligation (RO) and small-scale Feed-in-Tariff scheme (FITs) place the obligation of supporting investment in renewable electricity generation on energy suppliers. It is expected that energy suppliers will pass the cost of these obligations on to their various energy customers (i.e. households and businesses) through their electricity bills.

Ofgem publishes annual reports for both the RO and FITs which include actual cost data. The latest year for which data are available is 2010-11. The estimated average amount added directly to a household electricity bill in 2010-11 is £18 for the RO and 20p for FITs.

These estimates are based on annual costs of the RO and FITs from Annual Reports published by Ofgem(1) multiplied by the share of total UK electricity sales in 2010-11 accounted for by households(2) divided by the number of UK households in 2010-11(3). The actual cost of the RO and FITs on each household's energy bill in a given year may differ depending on how energy suppliers pass on the costs of the policy to their customers.

(1) Calculated according to the DECC-HMT definition of RO support costs, i. e. RO support cost for year = Obligation level for year (in ROCs) x RO buyout price for year.

(2) Energy Trends table 5.5, available at:

http://www.decc.gov.uk/en/content/cms/statistics/energy_stats/source/electricity/electricity.aspx

(3) CLG projections.

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 the RO, FITs and the Warm Home Discount, forms part of the Government's public spending framework which the Treasury has responsibility for.

The Government has also been reviewing the levels of support (‘RO bands') under the Renewables Obligation, with a focus on delivering renewable energy to help meet the 2020 renewables target in a cost-effective manner in order to minimise costs to consumers. In addition, the Government is introducing a tariff degression mechanism for solar PV under FITs, which will keep the long-term costs of FITs down.

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