Ed Miliband is poised to add another £1 billion to families' energy bills in a bid to encourage communities to accept more Net Zero infrastructure. Speaking after the energy price cap was raised by £221, the energy secretary vowed to go 'further and faster' in his dash for wind and solar farms, which he claimed would one day bring down bills.
Discounts for Pylon Neighbours
Plans include offering discounts to people living close to the new electricity pylons needed to link up wind and solar farms to the grid. The energy regulator Ofgem has now launched a consultation on enabling electricity firms to claw back the cost from a levy on the bills of other customers. Analysis by Mr Miliband's department suggests that the total cost of providing inducements to individuals and communities to accept new pylons could reach £1 billion over time.
Criticism from Former Minister
Former energy minister Sir John Hayes urged Mr Miliband to drop the scheme and focus on bringing down bills. He told the Mail: 'We need a full rethink instead of pressing ahead with this bizarre policy which is putting up bills and spoiling so much of our countryside at the same time.'
Price Cap Rise Confirmed
The warning came as Ofgem confirmed a 13.5 per cent rise in the energy price cap. The increase from 1 July, which has been driven by Donald Trump's Iran war, will see typical annual bills rise by 13 per cent, from £1,641 to £1,862. Further hikes are expected in October just as families start to turn on the heating as temperatures fall.
Miliband's Defence
Mr Miliband, who once promised his green dream would cut bills by £300, said the latest rise was 'deeply unwelcome news'. But he insisted the government was learning the 'right lessons' from previous energy crises, adding: 'The way to get bills down for good and avoid these price spikes is to go further and faster with our drive for clean homegrown power that we control.'
Opposition Criticism
Shadow energy secretary Claire Coutinho urged Mr Miliband to change course. 'Ed Miliband promised to cut bills by £300 but they went up by £200 before the Iran war even started and now they're going up again,' she said. 'We have to cut the taxes Government chooses to impose on electricity. If we want people to use electricity, we need to make it cheap.'
The latest rise in the energy price cap adds to the cost of living squeeze being felt by households after the war choked off oil and gas supplies from the Middle East. Motorists have already seen prices of petrol and diesel rocket. Food prices are also expected to be driven higher by the knock-on impact of the conflict.
Impact on Households
Wednesday's Ofgem announcement will directly affect around 33 million household domestic energy accounts using standard variable tariffs. Around 22 million who are on fixed tariffs will not be affected. The regulator's chief executive Tim Jarvis told the BBC that the rise was 'almost entirely driven' by the rise in global gas prices as a result of the war. Mr Jarvis said the next price cap move in the autumn will 'depend to a large extent on what happens in the Middle East' amid attempts to secure a peace deal.
Future Predictions
Analysts at Cornwall Insight predict that bills will rise again to around £1,899 from October. Craig Lowrey, principal consultant at Cornwall Insight, said: 'The rise in July energy prices will be felt across households already stretched by the cost of living, and even though it was widely anticipated, that does not make it any easier to bear. Even more concerning is October, where our forecasts are already pointing to a slight rise landing just as people start to turn their heating back on for winter.'
Discount Scheme Details
Mr Miliband's new energy bill discount scheme will offer £250 a year off bills for those living close to the new power lines connecting wind and solar farms to the grid. His department suggests the package could cost £1 billion, but predicted it would add no more than £2.50 a year to average bills at its peak. A spokesman for the department defended the scheme, saying: 'Conflict in the Middle East is yet another reminder that the only route to energy security and sovereignty for the UK is to get off our dependence on fossil fuel markets we do not control and onto clean homegrown power. As we build the infrastructure we need to deliver homegrown, affordable energy, communities must be given a stake. That is why we are teaming up with communities hosting new pylons to ensure they receive direct, tangible benefits.'
