Power groups bite back at Darling

Wednesday, January 09, 2008

Chancellor Alistair Darling's bid to portray himself as a consumers' champion over soaring energy bills has back-fired spectacularly, with power companies revealing that higher Treasury taxes account for almost 50pc of last weeks' rise in household energy bills.

Following swingeing price hikes announced by npower, expected to be followed soon by British Gas, Mr Darling summoned the head of energy watchdog Ofgem, Alistair Buchanan, to a meeting at the Treasury to explain what can be done about escalating bills.

But energy companies look ready for a showdown with the Chancellor if he attempts to demonise them for raising prices. One company said yesterday: "Mr Darling can grand-stand all he wants, but we will not let him forget that a sizeable chunk of price rises is due to higher "green" taxes and other costs introduced by the Treasury."

It is thought that Mr Buchanan has already been in touch with some power companies ahead of the as yet unscheduled meeting with Mr Darling. They have asked Mr Buchanan to point out the Treasury-imposed costs to the Chancellor. It is estimated that rises in the three main green taxes this year, including the Carbon Emissions Reduction Target (CERT), will add £28.50 to annual household bills. npower's price rise will raise its average annual electricity bill by £64.

A source at another energy company said: "No one is against green taxes; most of us are in favour. But it's a bit rich for a Chancellor to give the impression that we're all profiteering when the Treasury is putting up our prices. And it's not just green taxes, it's other business taxes."

The levy that power companies must charge each customer under the Emissions Trading Scheme is doubling to £30 a year. Under CERT, gas and electricity users are charged about £7.50 for each service, bringing in around £350m to the Treasury.

The Treasury refused to back down last night, with a source criticising power firms for their above-inflation rises for consumers and saying that it was "unrealistic" for companies to blame their increases on taxes that raised only £700m.

Energy experts had some sympathy with the power companies. David Hunter, electricity analyst at consultancy McKinnon & Clarke, said: "Rises in green taxes are part of the story, but not the whole story. The real reason for rising household bills is the rise in wholesale gas prices."

He added: "What we are seeing is a reaction to uncertainty in the market directly attributable to the government's inability to provide a clear energy plan. This is not what Darling will want to hear but there is no doubt that this is the case."

Of the big six UK energy companies, only npower would comment on the record, saying: "While rising wholesale gas and electricity costs have been a key driver of our prices increases, there is no doubt that the tax and environmental costs add a significant burden."

Ofgem declined to comment.
ENDS

Courtesy of Russell Hotten at Telegraph.co.uk


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