Energy companies to reduce bills after Government says it will cut 'green' obligations

The Government confirms it is consulting on cutting and removing some so-called 'green' obligations from energy companies, who say they will cut bills in return.

All of the Big Six energy providers will pass on potential Government changes to some so-called ‘social and environmental’ levies worth around £50 per household a year until 2015, it’s been confirmed.

The Department for Energy and Climate Change (DECC) has announced it will consult on the following reductions:

• a lowering of the Energy Company Obligation (ECO) target for big energy companies, leading to a planned saving of £30-£35 per household next year passed on via customers’ bills;
• a rebate of £12 on electricity bills funded by the Government via taxpayers, which will take over the provision of the Warm Home discount scheme for people on low incomes instead of the energy companies.

In addition, electricity distribution companies are being asked to reduce network costs by an average of £5 next year, which could also be passed on by energy companies to customers.

The planned reductions were first announced by Chancellor George Osborne in TV interviews on Sunday.

Some energy companies have already announced how this could impact energy bills.

British Gas/Sainsbury’s Energy

British Gas has confirmed that it will cut dual fuel bills by an average of £53 a year from 1st January. That’s equivalent to £41 from the cut in ECO target plus the £12 from not having to fund the Warm Home discount.

The same reduction applies to Sainsbury’s Energy customers.

However, British Gas has already put its dual fuel prices up by an average of £123 a year as of a couple of weeks ago. So the reduction is less than half the increase.

SSE

SSE says it will reduce prices by an average of £50, or 4%, for dual fuel customers. However, this reduction won’t happen until March for the ECO part and the autumn for the Warm Home rebate.

It was the first company to raise prices this winter, by an average of £104 a year, or 8.2%, for dual fuel customers. So again the reduction will be less than half the price rise.

SSE also says it will hold prices from next autumn until the spring of 2015, “subject to there being no marked and sustained increase in wholesale energy costs, network costs or new policy-related costs”.

ScottishPower

If you’re a ScottishPower customer, you’ll be pleased to know that it “agrees with Government estimates which suggest total savings for households of around £50 for a typical dual fuel customer”. But it’s refusing to be drawn beyond that.

Npower

Npower, which announced an average 10% price rise which came into effect over the weekend, says it will reduce its prices but is working out how large the reduction will be.

In the meantime, it has promised to hold energy prices until spring 2015 “subject to there being no marked and sustained increase in wholesale energy costs, network costs or new policy-related costs”.

E.On

E.On is the only one of the Big Six to have not announced price rises this winter – a pretty good move as it’s turned out.  It says “the result of these changes should mean our customers will pay less next year than otherwise would have been the case” and it is “working through the details and will provide an update in due course”.

Other providers

EDF is the only one of the Big Six not to have made an announcement yet but it no doubt will shortly.

As the other providers, with the exception of First Utility, aren’t large enough to be obliged to take part in ECO, they are unlikely to announce discounts.

Cheapest tariffs to switch to

If you still don’t like the sound of how much extra you’ll have to pay on your energy bills, here are the cheapest fixed tariffs available right now.

*Based on typical gas and electricity bill for someone who has never switched costing £1,420 a year (Source: Ofgem 2013) uplifted by 5% for recent price rises now £1,491 a year

New Government energy efficiency measures

To compensate for the reduction in the ECO scheme, the Government has announced some other measures to try to make the change ‘carbon neutral’. It will offer up to £4,000 to around 60,000 households a year who are moving home to pay for energy efficiency measures. This will be available for the next three years.

It is also introducing a scheme to help the landlords of 15,000 of the least energy efficient rental properties improve them. And it will spend £90 million on improving the energy efficiency of schools, hospitals and other public sector buildings.

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