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Energy UK has warned that urgent action is needed to bring down energy bills in line with Government targets. The Government has set an ambition of reducing energy bills by ‘up to £300’ by 2030.
A new report has highlights that reducing reliance on international gas prices is the only long-term solution. Being at the mercy of events like Russia’s invasion of Ukraine makes gas prices highly volatile, resulting in record energy bills and leading the Government to spend £100 billion to support homes and businesses.
Although bills have fallen from that peak, they remain 34% higher than before the crisis and customer debt stands at a record near £4 billion. Whilst the Clean Power mission will ensure lower energy bills in the next decade, its effect is unlikely to be meaningfully felt by 2030. The report notes that, as things stand, the Government has not yet set out a plan of action to reduce household energy bills by £300 by 2030. Relying on a decrease in international gas prices – over which we have no control – is not the solution.
Recent Government interventions such as expanding the Warm Homes Discount, introducing a debt relief scheme, and work on data matching to target help and support are welcome. But achieving significant bill reductions over the next five years will require a step change from the Government. Energy UK is calling for a National Strategy on Energy Bills led by No.10 or the Treasury to drive change across Whitehall and deliver on this promise.
Energy UK has outlined a range of potential savings, for example through accelerating critical network connections and changes to the Contracts for Difference scheme. The biggest possible bill reductions will come from removing policy costs from electricity bills, providing targeted support for customers in fuel poverty, and maximizing the potential of flexibility in homes.
Moving policy costs from electricity to gas, and funding a small amount through general taxation, could lead to bill reductions of up to £400 a year for homes with electric heating, while guaranteeing that no households see an increase in costs. Additionally with electricity no longer artificially expensive, there will be far more incentive for customers to switch to EVs and heat pumps.
Energy UK’s chief executive, Dhara Vyas, said “Clean Power is the only way to permanently deliver both energy security and stable, affordable bills, but the benefits are some way off. Energy customers have faced high bills over recent years so it’s only right that the ambition to reduce energy bills by 2030 should now be prioritised in the same way.
“With pressure on the public finances, difficult decisions and political leadership are necessary if we are to achieve the scale of bill reductions that the Government is targeting.
“Successive governments have failed to tackle the dual challenge of how we fairly pay for the crucial investments in our energy system and bring prices down for billpayers. Key infrastructure has been funded through energy bills, rather than through general taxation despite it being an investment in the country’s future. With more such funding required to achieve the Clean Power target, we can’t keep doing that while expecting bills to fall.
“Lower energy bills have the potential to power growth and prosperity across the country and industry is ready to work with Government on making this a reality.”