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IEA: Brexit provides real opportunity to bring down electricity bills
Thursday, March 23, 2017 17:05
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The institute for Economic Affairs has published a report calling for a reduction in electricity bills.
Brexit provides real opportunity to bring down electricity bills for low-income households
Executive Summary:
- Electricity charges for households in England and Wales have risen by 50 per cent in real terms since 2001, partly as a result of policies designed to reduce greenhouse gas emissions.
- The decarbonisation policies adopted have been complex and inefficient, and have also been contradicted by other measures such as the reduced rate of VAT imposed on domestic fuel. Emissions reduction objectives could be achieved at much lower cost.
- The government should phase out the Climate Change Levy, the Energy Company Obligation, the Warm Homes Discount and the Carbon Price Floor.
- Utility bills should be taxable at the full VAT rate (20 per cent) rather than the reduced rate (5 per cent). Any help to vulnerable households should be in the form of electricity vouchers.
- If the goal is to reduce emissions, decarbonisation should be undertaken under a single market-based mechanism such as a cap-and-trade scheme or a carbon tax, which would apply to all CO2 emissions.
- Climate-change policy should be technology-neutral. The government should establish a decarbonisation target and allow energy markets to adjust to it in the most efficient way.
The rising cost of electricity in the UK
Since 2001, electricity charges for households in England and Wales have increased by 50 per cent in real terms, from £352 to £537 (DECC 2016a).
1
This is in stark contrast to the decade prior to 2001, when, following liberalisation and privatisation, bills dropped by 26 per cent (Littlechild 2000). UK domestic electricity prices, on a per kWh basis, today are the ninth highest in the EU, and the highest when VAT and other taxes are excluded (Eurostat 2016).
2
The reversal has been even starker in the case of industrial electricity prices. After a drop of 25 to 34 percent over the 1990s,
3
the average industrial consumer of electricity saw the real price per kWh double
between 2004 and 2015 (Littlechild 2000; BEIS 2016b).
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Today, Britain has the third highest industrial electricity prices in the EU
The figures are deflated to 2010 GBP, for standard metering and assuming annual consumption of 3,800 kWh. There is some variation in charges depending on the payment method (standard credit, direct debit, or prepaid) and the figures are weighted by the prevalence of each payment method in 2015 (BEIS 2016a).
2
The UK levies no taxes other than VAT on domestic electricity bills, but other EU countries do.
3
The exact measure of the price decline depended on the size of the customer. Medium and large industrial consumers saw the biggest price drops (see Littlechild 2000).
4
Industrial consumption of electricity dropped by 28 per cent during this period, no do
ubt partly in response to rising prices, though consumption had been on a downward trend since 1973 (BEIS 2016c).
Source: https://tallbloke.wordpress.com/2017/03/23/iea-brexit-provides-real-opportunity-to-bring-down-electricity-bills/
