Yesterday SSE announced an 8.2% increase in their energy prices, they blamed this on a number of factors including the whole sale price of energy, cost of delivery and government green taxes.
8.2% right at the start of winter is of course an unpleasant price increase and there is no denying that it equates to a real cost rise of £107 on the average UK energy bill, however it does seem like the energy companies are jumping on the blame the government band wagon. I would go so far as to say that SSE have snuck in the “Green Taxes” line to leverage the emotional response that politics is infamous for.
So, are government green taxes really to blame and what would happen if they were removed from our energy bill?
Since keeping warm is what we really care about at this time of year we’ll just focus on the data available for gas prices. Taken from the Ofgem website we can see below that the wholesale price of gas accounts for 67% of our bill and green taxes are 6%.
If the government removed green taxes from our energy bill we would see a price drop, around 6% (assuming the energy companies passed it on to us). While this would be a great short term win - we would after all see a decrease of 6% in our gas bill - it would be relatively short lived.
Historically, energy companies have been quick to raise prices but slow to decrease them and nearly every increase in the last 3 years has been larger than the 6% taken up by green taxes. As shown nicely by this BBC infographic.
The sad fact is that we are too dependent on imported fossil fuels and fluctuations in the market are quickly passed on to the consumer. The best long term strategy is to invest in renewable and sustainable solutions that are less vulnerable to supply interruptions and market pressures - sadly these are expensive and require a seemingly high upfront cost for no immediate benefit. To have a chance at some long term stability I think 6% on our bill (that the energy companies would soon claw back anyway) is a fair trade for now.
To minimise the affect on your heating bill take this opportunity to switch energy providers and make sure you are on the best tariff. If you can, grab one of the very competitive locked tariffs that guarantee no price rises, sometime for up to 2 years!