Cut the Big Six energy companies down to size, George

With almost 8 in 10 people worried about rising energy costs and the suppliers being hauled in front of the Select Committee to justify price hikes, we call on the Chancellor to stand up for consumers when he stands up in the House of Commons to deliver this year’s Autumn Statement on the 4th December.

Which? believes that the Chancellor can make a real difference.  We’re calling on George Osborne to:

 Cut the Big Six down to size to get more competition into the energy market by:

  • Committing to separating energy generation from supply: wholesale costs are the biggest part of the eye-watering rises to energy bills that people have faced over the last ten years. The wholesale market must be made more competitive to help keep prices in check.
  • Ending the blank cheque for suppliers’ delivery of the Energy Companies Obligation (ECO): suppliers must be held to account for their costs, as we estimate nearly £200m a year could be saved if they delivered more efficiently

The Government has said it is reviewing how green and social policies could be ‘rolled back’ ahead of the Autumn statement.

So we are also calling on the Chancellor to cut the cost of Government energy policies that we can’t afford and control the costs being added to consumers’ bills, while helping the same number of households as last year to make their homes better insulated.

 Cut the cost of Government energy policies by:

  • Re-targeting the Energy Company Obligation (ECO): too much is focussed on expensive measures. If the Carbon Savings Obligation prioritised low cost measures instead, it could save between £242m-£363m a year, help at least the same number of households and still meet its carbon targets.
  • Scrapping the carbon floor price: it is an unnecessary burden on consumers that does nothing to incentivise low carbon energy production and increases wholesale costs. This would take in the region of £1 billion off bills next year.
  • Halting the smart meter roll out: it is a £12bn luxury we cannot currently afford. We should pause for two years, put a cap on the costs and decide how to make the roll out as cost effective as possible. This would save almost £80m a year for two years.
  • Taking the Warm Home Discount off consumers’ bills: this could cut bills by over £290m a year.

These measures could potentially save consumers up to £1.8 billion per year.

Last week 4 in 10 people told us they can’t reduce energy use any further as they have already cut down as much as they can. In addition 3 in 10 say they don’t know how they will heat their homes this winter.

Which? executive director Richard Lloyd said:

“Consumers have been left reeling by the recent round of inflation busting price hikes. People need help to cope with the rising cost of their energy bills – and they need it now.

“When George Osborne stands up to deliver his Autumn Statement we want him to stand up for the millions of hard-pressed consumers who are grappling day-to-day with rising energy costs.  He must cut the Big Six companies and the cost of Government energy policies down to size.”

Notes to editors:

1.   We have today written to the Chancellor to outline our plans – please see the text of this at the end of this press notice

2.   The total saving calculation of up to £1.8 billion is calculated from:

  • Re-targeting the ECO: up to £363m a year – this does not include the estimated potential efficiency gains of £200m a year from all suppliers delivering at lowest cost
  • Scrapping the carbon floor price:in the region of £1 billion off bills next year– of this consumers will pay at least 30% – £270 million – directly through their bills.  However the savings are greater than this (potentially up to an additional £630 million) because consumers also pay for the carbon floor price indirectly (e.g. buying food, buying and running a car) as it feeds through into the cost of consumer goods and services.
  • Halting the smart meter roll out: almost £80m a year for two years
  • Taking the Warm Home Discount off consumers’ bills:over £290m a year.

3.    With just over a month to go until the Autumn Statement, Which? is launching a campaign “Cut them down, George” that asks consumers to sign up and pledge their support to our measures. You will be able to access our campaigns page from Tuesday from here.

4.    The methodology for our recent energy poll last week: Populus, on behalf of Which?, interviewed a representative sample of 2018 GB adults online between 18th and 20th October 2013.  Data were weighted to be demographically representative of all GB adults. Populus is a member of the British Polling Council and abides by its rules.

5.  Which? has been tracking how consumers are coping in the current squeeze for more than a year, via our Consumer Insight Tracker.  You can find a link to all our latest stats here, but in terms of energy prices:

More than three quarters (77%) are worried about rising energy prices, this is consistently one of the top 3 concerns for consumers
Around a quarter (27%) trust energy companies
A third (33%) say they are likely to cut back on their spending on energy in the coming months [September 2013]

6. The latest findings from our latest Quarterly Consumer Report which can be found here – the main findings are below:

For the first quarter more people believe that the economy will improve in the next year (34%) than expect their own finances to improve (25%).
Three in ten (28%) cut back on essentials last month – that’s 7.5 million households.
Only a quarter (24%) say they’re living comfortably on their incomes – but this is higher for men (28%) than women (19%).
Last month, 33% of people felt their finances squeezed with 3 million borrowing money from friends or family.
20% have no savings at all
43% would find it difficult to cope with an unexpected expense
Only 26% say they are saving for a rainy day or unexpected expense
The average household saves £5.20 per week, or £270.40 per year

LETTER TO GEORGE OSBORNE

Dear Chancellor

On 4th December, you will stand up in the House of Commons and deliver your Autumn Statement.

This is an opportunity to do two things that would help the almost 8 in 10 people already worried about energy costs:

Cut the Big Six suppliers down to size to get more competition into the energy market, and

Cut the cost of government energy policies that we can’t afford.

Why act now?

Consumers have been left reeling by the recent round of inflation busting price hikes. Last week four in 10 told us they can’t reduce energy use any further as they have already cut down as much as they can. And 3 in 10 don’t know how they will afford to heat their homes this winter.

And British Gas told us that their price rise meant around only £2 a week extra, but the average household is only able to save just over double that – £5.20 per week – so that £2 halves what people can put away for a rainy day.

People need your help – and they need it now.

But to be clear, we don’t want to see any drop in the support for the fuel poor. We don’t want to see changes that continue to let suppliers off the hook. And we don’t want to see energy efficiency abandoned – it is too important for keeping costs under control in the long term.

So what can you do? You can use the Autumn Statement to:

Cut the Big Six down to size by:

Committing to separating energy generation from supply: wholesale costs are the biggest part of the eye-watering rises to energy bills that people have faced over the last ten years. The wholesale market must be made more competitive to help keep prices in check.

Ending the blank cheque for suppliers’ delivery of the Energy Companies Obligation (ECO): they must be held to account for their costs, as we estimate nearly £200m a year could be saved if they delivered more efficiently.

Cut the cost of government energy policies by:

Re-targeting the Energy Company Obligation (ECO): too much is focussed on expensive measures. If the Carbon Savings Obligation prioritised low cost measures instead, it could save between £242m-£363m a year, help at least the same number of households and still meet its carbon targets.

Scrapping the carbon floor price: it is an unnecessary burden on consumers that does nothing to incentivise low carbon energy production and increases wholesale costs. This would take in the region of £1 billion off bills next year.

Halting the smart meter roll out: it is a £12bn luxury we cannot currently afford. We should pause for two years, put a cap on the costs and decide how to make the roll out as cost effective as possible. This would save almost £80m a year for two years.

Taking the Warm Home Discount off consumers’ bills: this could cut bills by over £290m a year.

When you stand up in the House of Commons I hope you will also be standing up for the millions of hard-pressed consumers who are grappling day-to-day with the realities of rising energy costs by cutting both the Big Six and the cost of government policies down to size.

Cut them down, George.

Richard Lloyd

Which? executive director

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