Out-Law News 2 min. read
12 Oct 2011, 5:13 pm
The report by Deutsche Bank into the future of energy bills predicted that prices would rise by up to 25% over the next four years, according to Channel 4 News.
The government describes a household as being in fuel poverty if it needs to spend more than 10% of its income on fuel in order to maintain an adequate level of warmth and meet its other energy needs.
Energy costs have risen more than six times faster than household incomes since 2004, according to research from the Financial Times.
The Deutsche Bank study said that the rises were not down to retailers pushing up bills. Of the £48 billion it predicted would be spent on energy in 2015, only £1.3bn will go towards post-tax profits, it said.
Rising dependence on energy imports over the last decade was instead exposing consumers to international oil and gas prices, the bank said, while slow income growth as a result of the national economy was making energy less affordable.
"A political expectation is being created in people's mind that if we can bash the retailers, that will lower bills," said Martin Brough, author of the report. "But the numbers just don't support that. While it is tempting for politicians to blame excessive retail profits, the reality is that the UK is once again a net importer of energy and international fuel prices have doubled."
Brough added that the "radical" abandoning of green energy policies could cut 15% from bills by 2015. A major programme of reform to the electricity market which is anticipated to come into effect from 2014 will increase the cost of power generation by introducing a minimum price for carbon and financial incentives for using greener alternatives.
The Government White Paper on Electricity Market Reform will also raise environmental standards for UK power stations and introduce a 'capacity mechanism' designed to ensure that power stations are kept on standby to cope with increased demand in emergencies.
More than £110bn of infrastructure investment will be needed to build the equivalent of 20 large power stations and upgrade the grid, according to the report.
Energy law expert Chris Hallam of Pinsent Masons, the law firm behind Out-Law.com, said that the survey could encourage the Government to reconsider its energy policies.
"This might finally make the Government consolidate its thinking about how to tackle the energy crisis that is looming in the UK as more and more conventional and nuclear power stations close down without replacements having been built," he said.
Last week the Scottish Government announced a 35% increase in its spending on fuel poverty and energy efficiency programmes up until 2015.
Cabinet Secretary Alex Neil said that the Scottish Government would review its Fuel Poverty Strategy to ensure it takes account of recent energy company price increases and that financial assistance to households is targeted as effectively as possible.
He added that an extra £5 million would be invested in the Energy Assistance Package available to low-income households this year, taking the Scottish Government's overall spend on fuel poverty and energy efficiency in 2011-12 to £53m.
