Energy UK’s report, entitled How to Cut Bills: A crisis that can’t be ignored, includes recommendations to achieve significant bill reductions this Parliament. However, it recognises that there are few easy answers to the problem of high energy bills.
The report highlights that reducing the UK’s reliance on international gas prices is the only long-term solution. Being at the mercy of events like Russia’s invasion of Ukraine has made gas prices highly volatile, resulting in record energy bills and leading the Government to spend £100bn to support homes and businesses.
Although bills have fallen from that peak, they remain 34% higher than before the energy crisis and customer debt stands at an all-time high of nearly £4bn.
Energy UK said that while 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. It said relying on a decrease in international gas prices – over which we have no control – is not the solution.
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Energy UK is calling for a “national strategy on energy bills” led by the Prime Minister 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.
It said the biggest possible bill reductions will come from removing policy costs from electricity bills, providing targeted support for customers in fuel poverty, and maximising the potential of flexibility in homes.
It suggested that moving policy costs from electricity to gas, and funding a small amount through general taxation, could lead to bill reductions of up to £400 per 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.
Difficult decisions ‘are necessary’
Dhara Vyas, Energy UK’s chief executive, 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.”
