Plans to impose a fixed per-meter charge on gas customers to fund a new support scheme for biomethane injection would set a “risky precedent” for future low-carbon levies, Citizens Advice has argued.
The charity said a flat fee would leave households “bearing a disproportionate share of costs”, noting that “a studio flat will be paying the same levy as a large manufacturing facility”.
The consumer advocate said the Green Gas Levy as proposed by the Department for Business, Energy and Industrial Strategy (BEIS) in a consultation in September would be “the first flat cost levy applied to the gas system to fund a decarbonisation measure in which all users, including domestic consumers, would pay the same.”
Citizens Advice said the charges would be “regressive” and “place more of the burden on the poorest in society”. In contrast to domestic customers, businesses would bear just one per cent of the costs, despite accounting for 37 per cent gas demand.
“Although the analysis undertaken by the Department for Business, Energy & Industrial Strategy (BEIS) predicts an initial relatively low levy of £1.40 in the first year, with a prediction of a peak of £6.90 in 2028, we believe that by implementing a flat rate cost levy a precedent will be set,” the charity stated in its response to the consultation.
“This will make it easier to justify future flat rate cost recovery, for example future decarbonisation levies, and potentially push further inequitable and unfair costs onto consumer gas bills.
“It is hard to find any examples of an energy policy cost recovery mechanism materially changing following its introduction, and we consider there is a high risk that a methodology intended as a temporary measure may become enduring.”
Citizens Advice said a flat levy would also leave no incentive to consume less and instead create “a perverse cross-subsidy where those who pollute least cross-subsidise those who pollute most.”
BEIS has proposed to move to volumetric consumption charges in 2024/25 but Citizens Advice said the arguments for such a delay are “unconvincing”.
“We urge BEIS to reconsider their rationale and implement a volumetric approach from the start of the levy which is still 18 months away with sufficient time for suppliers to prepare and overcome any implementation issues.
“At the very least we would like to see BEIS accelerate the time in which they intend to switch the levy from a per meter point approach to a volumetric.”
It said the current approach “isn’t equitable, it isn’t cost reflective and it dampens signals to decarbonise.”