Following the announcement yesterday that the big six had ‘heard’ the plea from the Government and vowed to hold its prices for the next 2 years, the energy companies have acted as promised on another move by the Government. The green levies have been reduced and now the savings are being passed directly onto customers.
The energy companies have been cut some slack in the past fortnight as the Government announced it was going to extend the target for its ECO agenda, effectively halving the green levies the big six are currently paying. Today, plans have begun to unfold to pass these savings directly onto customers - something which many will be relieved to hear.
British Gas were the first to announce the happy news, saying they were prepared to cut bills by an average of £53 in January. This comes just a few weeks after an announced price increase of around £125 per household. Then SSE stepped up, saying they would reduce their customer’s bills by an average of £50 (but not until April) following the easing of the green levies. Npower haven’t announced a reduction in prices, but have promised a price freeze until 2015. It’s hard to see what Npower’s strategy might be here as all of the big six are expected to release details of a ‘price freeze’ following the Government’s call to action. All of the big six energy suppliers have made some kind of commitment to reducing or holding their prices, but all have stipulated that any rise in wholesale energy price would override this and lead to further increases.
The green subsidies aren’t just disappearing though. While David Cameron might’ve been okay with this, activists, academics and local authorities were not, claiming that the ECO charge was an important catalyst in helping Britain reach its energy targets while also providing employment and contributing significantly to the economy. Instead, some of the subsidies are falling into the laps of the general public to pay through general taxation.
Energy Secretary, Ed Davey is happy with the progress, saying that households across the country should save around £50 per year on the fuel bills. Labour seems less convinced however, accusing the Government of using smoke and mirrors and not being direct or forceful enough with the energy giants. Ed Miliband is standing by his proposed 20 month legislative price freeze if labour are elected in. The current average annual energy bill for a household in the UK stands at £1390. It begs the questions whether all of this is really worth it - or whether the Government should tackle the issue more aggressively and investigate the root of the problem. For example, David Cameron talks of a ‘big sixty’ and market stimulation but little has been done so far to really challenge the monopoly of the big six. Making it easier to switch energy companies and reducing the time it takes to do so would be a brilliant first step.