Telegraph muddle the numbers on electricity bills
The Daily Telegraph appear to be getting its spin on the government’s upcoming Energy Bill in early. But in suggesting that the government are predicting a £200 rise in electricity bills as a result of “new subsidies” for low-carbon energy, it appears to have read the figures wrong.
A £200 rise in electricity bills?
The Telegraph’s online piece on the Energy Bill announcement, published yesterday, is headlined “Queen’s Speech 2012: energy laws will send bills soaring”. A shorter version appears on p.5 of today’s paper, headlined “£200 a year for green power”.
The piece suggests that “the new subsidies” introduced as part of the government’s electricity market reforms will add around £200 to consumer electricity bills “over the next 15 years”:
Government estimates suggest the new subsidies will put an extra £205 a year on the average household electricity bill over the next 15 years.
It has predicted domestic electricity figures will rise from £477 per year to £682 per year by 2026.
These numbers – £477 and £682 – appear to come from an impact assessment report produced by the Department of Energy and Climate Change (DECC) in December 2010. It’s worth noting that this consultation document has been followed by a full EMR white paper and so these figures are fairly old now, and have since been updated.
Here’s the table in question:
Image - Screen Shot 2012-05-10 At 17.19.21 (note)
Source: Electricity Market Reform – options for ensuring electricity security of supply and promoting investment in low-carbon generation. Impact assessment. p.92
The Telegraph article compares two figures from the ‘baseline average’ column to calculate a £200 rise in electricity bills between the periods 2011-2015 and 2026-2030
But these ‘baseline averages’ are not figures showing how bills will rise because of new policies. In fact, these ‘baseline average’ figures are DECC’s estimate of what bills will do if measures contained in the Energy Bill are not introduced.
DECC told us that
The baseline average refers to the electricity bill including continuing with the Renewables Obligation (and other energy and climate change policies), but does not include EMR. The reason is that we are looking at the impact that EMR has on bills and therefore want to compare the Baseline Bill vs. Bill With EMR.
The increase in the baseline average bill captures globally higher gas prices leading to higher electricity price, rising network costs and the impact of climate change and energy policies.
So current energy and climate change policies do account for some of this ‘baseline’ £200 increase. But the £200 rise also includes the impact of higher gas prices and rising costs from the electricity network. And it specifically excludes the effects of any of the new policies in an Energy Bill, which are assessed in the other parts of the table.
The Telegraph appear to have interpreted figures showing how bills will change if new policies are not introduced as showing how bills will change if they are introduced. In other words, the figures show the opposite of what the article says they do.
So how much do the government think energy bills will rise by?
As we mentioned, the government has published newer versions of these figures. So we can at least get an accurate assessment of DECC’s view, seeing as that is what the Telegraph are discussing.
In the table below, taken from the newer EMR white paper, DECC argue that, depending on which policies are adopted, the measures contained in the Energy Bill will actually reduce household electricity bills:
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Source: Planning our electric future: a White Paper for secure, affordable and low-carbon electricity: p 119 Figure 23.
The latter four columns in the table above represent different options for the market reform part of the Energy Bill. They all suggest that although electricity bills will go up overall between now and 2030, the measures contained in the Energy Bill will make the rise smaller.
When the white paper was first launched, DECC put it like this:
The electricity market reform package will minimise the impact on bills by insulating the UK from volatile fossil fuel prices and providing investors with the certainty they need to raise capital more cheaply. Estimates are that with the market left as it is now, domestic electricity bills will be around £200 higher in 2030 compared with today’s average annual household bill (about £500). The market reform packages published today limit this increase to £160 – £40 lower than it would otherwise be.
Of course, DECC’s predictions are open to being challenged and may not be right – but their assessment is clearly that with the EMR measures contained in the Energy Bill in place, household electricity bills will be £40 lower in 2030 than otherwise.
The Climate Change Committee’s numbers
The article also references the Committee on Climate Change’s views – the online version of the article contains the line:
The independent Committee on Climate Change says bills are likely to rise by £200 by the end of this decade, with half of this due to current green policies.
Indeed, the Climate Change Committee (CCC) report, released in December 2011, does predict something which resembles the Telegraph’s interpretation:
…the electricity bill would increase by £180 (42%) over the next decade, from £430 per household in 2010 to £610 in 2020. Of this change, just over £70 would be due to changes in wholesale, transmission and distribution costs, around £100 due to costs of supporting low-carbon investments and around £10 due to costs relating to energy efficiency measures.
It’s worth noting that this doesn’t support the headline either – the assessment is for 2020, not 2030, and the CCC explicitly say only £100 of such a rise would be related to “low-carbon investments.” To get this figure, you also have to ignore the other part of what the CCC say, which is that rather than rising, bills could fall by £10 over the period if policies to encourage energy efficiency are successfully introduced.
None of this has anything to do with the Energy Bill itself, as far as we can see.
So that’s all as clear as mud – and it’s probably just the first salvo. DECC told us that “We will also be publishing our latest estimates [of impacts of policies on energy bills] towards the end of this month with the Draft Energy Bill.”
According to some reports, the electricity market reforms will be laid out for publication on 22nd May, so expect another round of media coverage then.