Huhne challenged over power cost

The Government has been warned to make clear the cost of proposed reforms of the electricity market.

Unveiling the White Paper yesterday, Energy Secretary Chris Huhne insisted the measures – aimed at securing supplies while cutting carbon emissions – were the “best possible solution” to protect consumers against the kind of price increases seen recently.

Mr Huhne said the package of reforms would help secure the £110bn investment needed to replace the quarter of UK power stations due to close in the next decade.

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But his claims were immediately met by warnings that the Government needs to provide more detail over how the proposals will actually work, for both industry and householders.

Richard Lloyd, Which? executive director, said: “We support the emphasis on affordability and attempts to tackle increased costs, but the Government must be as clear as possible with consumers about how far prices will rise in comparison to today’s energy bills. It must also expand on how these proposals will work in practice.”

The Department of Energy and Climate Change (Decc) claims the reforms will add around £160 to household bills by 2030 but leaving the current system in place will cost £200 a year.

The legislation will see companies given long-term contracts to guarantee a stable price for electricity from low-carbon sources.

Mr Huhne said the deals would give investors the certainty they needed to invest in power sources with high up-front costs such as nuclear reactors and offshore wind farms, reducing the UK’s reliance on fossil fuels and the impact of rising gas and oil prices.

The announcement comes just days after British Gas said it was increasing gas and electricity prices by almost a fifth in the wake of rising wholesale gas prices.

The Government says the scheme could lead to slightly higher bills in the short term, but households would see a saving overall.

Even if all “green” measures to reduce emissions were ditched and nothing was done on climate change, it would only cut bills by around 1 per cent compared to keeping the raft of environmental policies, Mr Huhne said.

But the benefits of a less fossil fuel-dependent world would be greater still, he said, with high gas and oil prices likely in the future.

“If you want protection from those impacts you’re going to have to go for low-carbon policy and not pretend there’s a cheap world out there on offer that isn’t out there,” he warned.

Mr Huhne said there could be no more dithering over energy investment as it was needed to keep the lights on, adding: “You can have blackouts or you can have investment. What do you want

“I’m absolutely convinced what we’re doing is the best possible solution for the British consumer.”

A roadmap for renewables was also unveiled highlighting eight technologies with the greatest potential to meet the UK’s target of generating 15 per cent of all energy from green sources by 2020.

They are onshore and offshore wind, marine energy, electricity and heat from biomass, ground and air source heat pumps and renewable energy for transport.

Mark Hanafin, managing director of Centrica Energy, British Gas’s parent company, said the announcement was an important step, but added: “There remains much detail to resolve so that investors can have confidence that the tax and regulatory environment makes the UK energy sector a good place to invest.

“These measures come at a cost and it is vital that all of us – Government, regulators and the industry – are open and transparent with the public about the true impact of these changes.”