Rising energy costs are a wake-up call to government

A report released by the Department of Energy and Climcate Change today showed the impact of government policy on fuel bills. Secretary of State Ed Davey said that government policy could only influence about 11 per cent of fuel bills as the remainder constitutes interntional prices, transmission, metering and VAT costs. Davey neglects a more radical overhaul of energy policy, that tackles many of the rules and regulations that keep energy prices high. Former energy regulator Stephen Littlechild writes:

The causes of price increases lie in international wholesale gas markets, in the costs of low-carbon generation, environmental regulation and other government and EU policies. We should explicitly explain and discuss these costs.

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Steve Radley, Policy Director at EEF, the manufacturers’ organisation, said:

This is a wake-up call. Policies are already adding 30% to business electricity prices, and this will rise to 50% by 2020 and 70% by 2030. Measures to shield the most energy intensive industries from a portion of the costs will make a difference but, unless we get a grip on spiralling policy costs, steeply rising electricity prices for the rest of the sector risk making the UK an increasingly unattractive location for industrial investment and undermining efforts to rebalance the economy. The first step is scrapping costly policies with questionable environmental impact, such as the carbon price floor and the CRC Energy Efficiency Scheme, as soon as public finances allow.