The government must not cave-in to the big energy companies (again)

On Thursday morning we woke up to the front page of The Sun newspaper proclaiming that the Prime Minister had ordered his Ministers to: ‘cut the green cap’ in a desperate attempt to match Labour’s price freeze and plan to get energy bills under control.  For a man who built his identity on ‘Vote Blue, Go Green’ it is an incredible u-turn, even by the standards of this Government.

No-one should be in any doubt: social and environmental obligations are not the principal cause of bills rising so sharply.  Escalating prices are due to an energy market that lacks transparency, has too weak a regulator, and which has allowed energy companies to get away with overcharging.  This is why Labour has pledged to freeze bills for 20 months after the next general election so that we can reform the market, bringing transparency between the retail and generation parts of the energy companies and establishing a more powerful regulator.

And in this heated debate about the future size and scale of green levies, it appears the Government and the energy companies have completely forgotten those who are fundamentally affected by the policies that are seeking to drop. It is a fact that millions of households up and down the country will struggle with their heating bills this winter.  Over 2.39 million British households are in fuel poverty. Yet the principal component of the green levies is the ECO scheme, which offers people living in fuel poverty the prospect of a route out of it through better insulation and energy efficiency measures.

Greater energy efficiency must be an essential part of our response to rising prices.  If unit prices rises are to rise in future, either through greater demand for fossil fuels or through more expensive renewables, using less energy is the only way to keep bills down.  I do not believe the Government’s ECO scheme is as effective or efficient as it should be. The bureaucracy required behind each installation borders on the absurd.  But to cut the only functioning energy efficiency scheme the Government have would be a betrayal of both fuel poor households and Britain’s beleaguered insulation industry.  And scaling back the commitments, by extending the deadline for energy companies to meet their existing obligations by a number of years, would make a poor scheme even worse, and see work grind to a halt in the short-term.

Scaling back the ECO commitments would also be unfair to those companies which have actually tried to meet them. Figures obtained by the Institute for Public Policy Research this week show considerable divergence in the energy companies’ progress at delivering ECO. For example, British Gas has achieved just 4 per cent, 6 per cent and 9 per cent of its targets towards the three ECO obligations.  EON, however, has met 26 per cent, 62 per cent and 74 per cent of theirs.  In addition, because the Government’s other flagship policy, the Green Deal finance scheme, has been a dismal failure so far with just 219 plans taken out against a target of 100,000 this year, scaling back ECO would mean Britain falling far behind on the essential retrofitting activity that everyone agrees has to take place.

Because despite much good work taking place over the last decade to make Britain’s housing stock more energy efficient, there is still a great deal of work to be done. In Europe, only Estonia has worse fuel poverty statistics than Britain.  The ECO scheme was already one of modest ambition in this regard – aiming to lift only 125,000 to 250,000 households out of fuel poverty.  To cut it back even further would be abdication of responsibility and represent yet another Government cave in to the big energy companies.

ECO could certainly be much improved – it could be made more efficient by focusing its delivery on geographic areas, and by devoting a far higher degree of the resources it raises to lifting people out of fuel poverty. Alongside a properly functioning Green Deal, this would allow us to also hit our carbon reduction targets and generate many thousands of jobs.

The Government has a clear choice ahead of it.  It cannot be allowed to cave-in to the demands of the big energy companies again.

Jonathan Reynolds is the Lab/Co-op MP for Stalybridge and Hyde and Shadow Minister for Energy and Climate Change