Prime Minister Theresa May is taking aim at the wrong energy target in tariffs: she should go after green levies and smart meters

 
Tracey Boles
Theresa May
Theresa May (Source: Getty)

Prime minister Theresa May appears to be limbering up for a three-pronged attack on “rip-off” energy firms, broadband providers and housebuilders that stockpile land.

On the energy front, speculation has been mounting that the so-called big six energy firms will soon be told to offer fewer, simpler tariffs and make switching suppliers easier for families who are “just about managing”.

With household energy bills on the rise, it is easy to see why the big six energy firms are in May's sights. According to price comparison service MoneySuperMarket, the average cost of the cheapest energy tariffs available in the UK jumped by seven per cent between early September and early November.

This comes against a backdrop of rising wholesale energy costs, but prices for consumers have risen at a staggering rate.

So in energy tariffs, May is going for a populist target. But there is scepticism at whether simpler fees will ease the pressure on household finances. Dan Lewis, senior adviser on infrastructure policy at the Institute of Directors, believes the current differentiation of tariffs offers choice and is generally a good thing, and that simplification could be a backwards step. He says that switching accounts has already become easier, leading to record number of people doing so this year.

Instead, May should look at the levy control framework and smart meters, both government energy schemes.

The levy control framework was established in 2011 by the department of energy and climate change and the Treasury to monitor and control the cost of government energy schemes that are funded through levies on energy suppliers. The suppliers then pass on the cost to consumers in energy bills. The spending cap for these schemes is to rise to £9bn in 2020-21.

Another programme set to be funded by consumers is smart meters, a highly ambitious £11bn scheme to install meters that display usage in every UK home and small business. But there are concerns it will only lead to savings of £11 a year per family.

May seems determined to take a swing at the sector, but to be really effective, she should reduce the government's onerous green taxes on bills and take another look at the potential folly of smart meters.

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