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UK Government Sending Out Contradictory Messages Over Green Energy Crisis

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Tim Ross, The Sunday Telegraph

Senior Tories are drawing up a secret plan to cut green taxes as part of a radical overhaul of the energy industry designed to reduce customers’ bills.

A senior Liberal Democrat source denied that there was any government “review” of green energy policies under way.

 

Conservative and Liberal Democrat ministers are locked in a battle over whether to reduce the green levies which energy firms say are contributing to the sharp rises in gas and electricity bills this winter.

Ed Davey, the Lib Dem Energy Secretary, is said to be “furious” that the Conservatives want to renegotiate the Coalition’s fragile truce on energy policy, which saw last year’s Energy Bill delayed by Coalition infighting.

However, David Cameron and George Osborne are understood to have resolved to act in response to the public outcry at soaring energy costs, after British Gas and SSE announced sharp increases in household gas and electricity bills. […]

Energy firms blame the environmental and social obligations placed on them by ministers for the increase in bills.

The industry claims that these green levies add £110 to a typical household bill, money which is then used to pay for loft insulation schemes and subsidies for renewable energy projects, under the Coalition’s rules.

The two governing parties know that they are running out of time to offer a rival policy to Ed Miliband’s populist pledge to freeze energy bills for 20 months if Labour wins the next election.

A senior Tory said the Conservatives were now “on the back foot” as a result of Mr Miliband’s gambit and must act soon.

The Telegraph can disclose that a three-point plan has already been drawn up by Tories inside the government. Under the plan:

:: The completion of the Energy Companies Obligation, which involves fitting insulation and energy saving measures into the homes of vulnerable customers, such as pensioners on low incomes, would be delayed by two years to 2017.

Energy companies would be given more time to meet their targets for cutting carbon emissions under the ECO scheme, under the plan. The energy companies would be required to promise to pass on the cut to their customers in the form of lower bills.

The framework for the ECO programme would also be re-written to encourage smaller energy companies to take part, increasing competition in the market beyond the “big six” firms, which include British Gas and SSE.

:: Ministers would review the Carbon Price Floor, a tax on fossil fuels used to generate electricity, which the power companies say will add £26 to household bills.

:: Cutting the cost of distribution of gas and electricity, which is organised through smaller regional monopolies. Government sources say Ofgem, the energy regulator, has failed to be tough enough on bringing down the costs of distribution on the gas and electricity networks, which represent about 20 per cent of household bills.

Michael Fallon, the Conservative Energy Minister, told The Telegraph that all of the green taxes would be assessed to identify cases where the costs they imposed on customers were too high.

“We have to look at the seven green taxes and see where the burden is too high,” he said. “And when network costs account for a fifth of bills then Ofgem must bear down harder on distribution monopolies.”

The green schemes which Mr Fallon has identified for examination are the ECO, the Carbon Price Floor, the Renewables Obligation, Feed in Tariffs, the EU Emissions Trading System, the Warm Homes Discount, and smart metering initiatives.

Ministers are now looking in detail at the reforms. However, some senior figures inside the government want to go further and “get rid of” green taxes entirely, sources said, despite likely resistance from Mr Davey and the Lib Dem leader, Nick Clegg.

A senior Liberal Democrat source denied that there was any government “review” of green energy policies under way.

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