The Public Accounts Committee (PAC) has demanded that the Department of Business, Energy and Industrial Strategy (BEIS) commits to greater transparency over energy bills and an annual report detailing green levy costs.
The report into consumer-funded energy policies found that mismanagement of the Levy Control Framework – the mechanism used to control subsidies for renewable energy deployment – is likely to result in added costs of £110 to a typical household’s energy bill by 2020, £17 more than originally anticipated.
Meg Hillier MP, chair of the PAC, accused the government of failing to meet commitments to report annually on the impacts on bills and said current arrangements “just aren’t good enough”.
“This is a result of poor forecasting and further evidence of excessive optimism in the implementation of energy policy.
“Government must take action to address this and also ensure customers can see clearly what they are paying towards existing and future schemes through their bills,” she added.
However Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit, said the “latest instance of clumsy policy” threatened to turn “a UK success story into negative news”.
“…an inability to adapt and keep up with the pace of change in low-carbon technology, sub-par forecasting and incessant policy changes are having an unwelcome effect on customer bills.
“As new technology replaces old and storage, demand response and grid interconnection become more widespread, the UK can expect to save up to £8 billion per year. Further, given the headstart we have on many other developed nations, the global transition to smarter power networks offers tremendous export opportunities, vital as we look to cement our new place in the world,” he said.
Lamenting a lack of “transparency, rigour and accountability”, the PAC found that a series of failings at government level caused spending within the LCF to spiral and that its response was not quick or coherent enough to limit the overspend without damaging investor confidence.
Principal to these failures was what the PAC termed a “culture of optimism bias” within the now defunct Department of Energy and Climate Change (DECC). The committee said the department did not consider that its projections or market research capabilities and failed to regularly consult on spending, contributing to a lack of transparency over spending.
The PAC pointed in particular to how projected LCF expenditure soared by £2 billion in the space of four months in 2015. Nearly one-third of this spend – some £600 million – was attributed to the use of 18 month-old load factor projections for offshore wind turbines when estimating their electricity generation.
The government’s response for this overspend – to enact significant cuts to consumer levy-funded subsidy schemes such as the Renewables Obligation, the feed-in tariff and Contracts for Differences – was also criticised, with the PAC stating that the measures risked harming investor confidence.
The PAC has established a number of recommendations which it said would improve the management of the future LCF, set to be unveiled at next month’s spring budget.
Among the PAC’s recommendations are;
- Regular reports on LCF expenditure and an annual energy bill report, published in an easily understandable format, which also makes clear what bill payers are being charged, the first edition of which should be published by April 2017.
- Assessments of the uncertainty surrounding energy scheme forecasts, with proportional back-up plans to help control costs should central forecasts prove incorrect.
- Regular reviews of BEIS’ market intelligence capabilities and assurances that it maintains access to the “best available evidence”.