Energy secretary Ed Davey has claimed that the government can do very little to stop energy prices rising across the UK, as he warned that the potential is there for bills to rise further for UK consumers.
The minister said the government was accepting of the fact there would be price increases due to some factors it simply cannot work around, adding that there are rises that are “impossible to avoid”.
It comes just a week after SSE became the first of the big six energy companies to announce that it would be bumping up its prices this winter.
The firm’s customers will be facing bills 8.2% higher than current charges from November, it said.
Rising gas prices causing bill hikes
Mr Davey said the rise in wholesale gas prices was one of the biggest factors in customers facing higher bills. He said this makes up a large part of what households are charged, which means when they go up, bills are not far behind.
“The gas price has gone up by 50% over the last five years and over 50% of the bill is wholesale gas price. We have also seen a big increase in the network costs because we have got to replace ageing network. These are costs which are impossible to avoid,” he explained.
However, he also became the latest politician to defend the subsidies on offer in the energy market at current, despite these having received criticism recently.
SSE’s director of retail economics Richard Westoby said last week that the so-called ‘green taxes’ were one of the main reasons the company had been forced to increase what it charges.
But Mr Davey followed in the footsteps of business secretary Vince Cable by saying that the scrapping of these subsidies is not the answer.
“Most of them are actually social policies to help the fuel-poor manage their bills. I don’t think we want to get rid of those,” he said.
“Moreover we need to help people who aren’t necessarily fuel-poor but want to do energy efficiency measures to reduce their bills. It would be silly to get rid of that aspect. If you actually look at the part of the so-called green taxes which is funding renewable energy/low carbon energies it’s only 4% of the bill.”
UK ‘on the verge of investment’
Mr Davey did say, however, that the UK could soon be seeing largescale investment from the Far East after he returned from a ten-day visit to the region.
“The Chinese, along with the Koreans and the Japanese and other countries, are very interested in the opportunity in Britain’s nuclear sector,” he said.
“I think it is really possible that we will see massive Chinese investment, not just in nuclear but across the board. And I think we will see massive Japanese investment and Korean investment.”
He said there was a wave of interest, and insisted the UK could be very close to seeing tens of billions of pounds invested into the UK energy sector.