Ministers 'not seeking price freeze'

Written By Unknown on Jumat, 29 November 2013 | 19.21

29 November 2013 Last updated at 05:43 ET
Prime Minister, David Cameron

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David Cameron: "We are dealing with real policies to make a real difference"

The government has denied reports it is seeking a commitment from energy firms to hold their prices down until 2015.

The companies told BBC News ministers were putting pressure on them to commit to a price freeze.

But Treasury sources say this is not part of their plan - and they were looking instead at cutting the industry's green commitments to help keep prices down.

Labour, who want a price freeze, said government policy was a "shambles".

Energy industry sources told the BBC on Thursday that the government wants to avoid another round of price rises that could be blamed on state-enforced green levies and the two sides had been holding talks about plans which could result in average bills falling by £50.

'Not pleading'

Government sources have confirmed that they have been engaged in what they describe as an "information gathering" exercise with the energy sector.

But they insisted they were not pleading with the "big six" energy firms to hold bills down in the run-up to the 2015 general election, saying this was "not part of the package" on the table.

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They pointed out that different companies have a different track record on delivering their obligations so an information gathering exercise was essential to framing future policy changes - which could be announced by Chancellor George Osborne in Thursday's Autumn Statement.

Prime Minister David Cameron, who is at a summit in Lithuania, said the government was sticking to its original plan on energy prices.

"I want to help households and families by getting sustainably low prices and the only way you do that is to increase competition and roll back some of the levies on people's bills.

"I've said that's what we're going to do and that is what we're going to do."

Treasury sources told the BBC's Iain Watson one energy company might be interpreting the "information gathering" exercise as a request to hold down prices but this was not an accurate interpretation.

He said Treasury officials rejected any suggestion they were going "cap in hand" to the energy sector but acknowledged they were considering shifting the cost of some green levies from bills to general taxation and review other social obligations - two key demands of the industry.

"Our package is simply about rolling back levies and charges," a government source added.

"If that is enough to mean no rise next autumn, then that's an added bonus but there is no plea to the energy companies."

Labour, which has promised to freeze energy prices for 20 months if it is elected, said the government's policy was totally "confused".

Energy firms were "overcharging" firms, shadow energy secretary Caroline Flint said, but were being "let off the hook" by the government.

"The truth is that only by legislating for a freeze can we guarantee that it will happen," she said. "David Cameron won't do that because he's not prepared to stand up to the big energy companies."

The opposition is publishing its own plans to make the market more competitive, by separating firms retail and generation operations and giving a new regulator much greater enforcement powers.

'Deferring costs'

A senior figure at one of the big six suppliers, who did not want to be named, told the BBC that he wanted to work with the government but they needed "predictability on costs".

He said the key was to change the Energy Company Obligation (ECO) scheme, which requires the firms to deliver energy efficiency measures to homes.

"If they can resolve the issues around ECO, that takes the gun away from our head," he added.

But another industry source cited several factors linked to government policy, including the Carbon Price Floor and the Renewables Obligation, which he said would drive costs higher in the years ahead.

The government is seeking to spread the cost of the ECO scheme from the current 27 months to four years.

The source said: "This is deferring costs, not getting rid of them. The bus has already left the station."

As well as green and social obligations, the government is also looking at the cost of transmitting energy to our homes. This makes up 23% of an annual dual fuel bill.

According to the industry regulator Ofgem, electricity distribution costs will add £15 to an average bill over the next year, but flatten out thereafter.

Industry sources say the government wants that cost spread over a longer period.


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