Non-energy costs, sometimes called third party charges, are not a new thing. They have always been a substantial part of the electricity bill. They now account for around a half, and include the cost of getting electricity safely to the door via transmission and distribution networks, and the cost of subsidies such as the Renewables Obligation and the feed-in tariff.
However, over the past few years there has been greater uncertainty about the level of these charges. This has pushed electricity bills up for customers, with further rises potentially on the cards.
There is a need to move to a low-carbon economy and to keep the lights on, and these costs are all part of securing the future of the UK’s energy supply. But accepting that investment in infrastructure and renewable power is a good and necessary thing does not mean having to accept uncertainty. Haven Power wants to see more stability in these costs so that customers are not hit with unexpected price rises and do not have to pay over the odds for certainty.
The bottom line is that all the changes in these non-energy costs that consumers have to pay should be predictable, transparent and justified.
Because of large and unpredictable variations in these charges – both year on year and region by region – businesses are being unnecessarily penalised. They are being hit with large bills because suppliers are unable to accurately forecast what these non-energy costs will be. The economic climate is such that businesses are striving to remain competitive, but they are bearing the burden of uncertainty thanks to the way non-energy charges are being set.
This uncertainty is bad news for small and medium-sized enterprises in particular. For a typical Haven customer, the uncertainty adds between £300 and £500 to the annual bill. Haven is lobbying for Ofgem and the Department of Energy and Climate Change to prevent sudden and unexpected increases in these costs. Working with its local MP, Haven has asked for a government response to the call for greater certainty: first, to introduce simpler, more predictable ways of setting these charges; and second, to ensure that regular forecasts of expected increases are published and all regulated charges are fixed for at least the year ahead.
Haven’s priority is to keep costs down for its customers and to have stable charges and bills. To do this most effectively, it needs the government and network operators to support these proposals. Its suggestions are entirely reasonable and practical. Implementing them would mean energy suppliers could stop charging their customers for uncertainty – and it would remove a significant barrier to entry to the UK electricity supply market.
Haven absolutely supports schemes to address the country’s electricity supply needs and low-carbon future. But the government must engage with, and listens to, the needs of bill payers as well as low-carbon generators and developers.
Peter Bennell is chief executive of Haven Power
This article first appeared in Utility Week’s print edition of 19th July 2013.
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