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Chris Huhne’s Green Tax Hike Threatens Economic Recovery

Green taxes will make up more than a third of the price of electricity by the end of the decade, pushing up prices to new highs by 2020.

Figures from Utilyx, the energy consultants and traders, forecast a 58pc rise in the cost of power by 2020, largely driven by the impending avalanche of green taxes due to come into force over the next 10 years.

The consultants estimate that 18pc of the current electricity price relates to climate change policies – or £15 per megawatt-hour out of a £82 per megawatt-hour average.

However, green taxes and new infrastructure costs will constitute 38pc of the charges, or £50 per megawatt-hour out of £130 per mega-watt hour, by 2020.

Consumers and businesses are already facing much higher prices this year because companies have put up power bills by 7pc to 16pc, blaming volatile wholesale prices.

Andrew Horstead, risk analyst at Utilyx, said this should cause “alarms bells to ring within Government, at a time when its measures to stimulate investment in low carbon generation will also feed through to higher prices”.

The Utilyx forecasts give a clear estimate and breakdown of the kind of pressures business will be facing in real terms against their current costs.

Utilyx takes into account all the known green levies and makes an estimate for the likely value of the feed-in tariff subsidy, which has not yet been finalised by the Department for Energy and Climate Change.

In contrast, the Government has only given figures for how much bills might rise in percentage terms against the future costs of leaving the system as it is.

Its central case scenario says electricity bills will be 8pc to 31pc higher for heavily energy-intensive industries.

Roger Salamone, energy adviser at manufacturing group EEF, has criticised the Government’s figures, saying: “We think these estimates look very low. But even these increases on our costs are going to be really quite significant and a big issue to manage.”

Manufacturers are lobbying for £470m in tax relief from the heaviest burdens, which they claim will put chunks of energy-intensive British industry out of business.

Separate analysis by Waters Wye Associates for the Energy Intensive Users Group last year estimated that for a large company with a bill of £40m, the extra cost of green levies and new transmission for renewables would be £10m.

However, new measures introduced in the Government’s electricity market reforms have increased the likely burden since then.

The Sunday Telegraph, 21 August 2011