Chris Huhne this morning criticised a Telegraph headline – suggesting bills would rise by £500 because of his energy reforms – as “ludicrous” and “absolutely bonkers”.
The splash quoted a website called uSwitch predicting that bills would rise per household by £500 from their current average energy bill of £1,157. (Although it’s not clear by when). Huhne said the rise would instead by from £500 per household to £660 by 2030.
The difference can be explained by the fact that the uSwitch figure relates to total energy bills (including gas) whereas Huhne is just talking about electricity, the subject of the review. Both estimates are in real terms, ie before inflation.
Curiously, however, there is not such a massive difference in the proportionate increase. Huhne’s rise amounts to 32 per cent over the period, while USwitch is predicting 42 per cent.
That implies that Huhne is overusing his language somewhat when dismissing the survey in such sweeping terms.
But – and this is where the energy secretary should be heard – his argument is that we don’t know how much bills would go up by without the reforms, which include an implicit carbon tax and new feed-in tariffs which will guarantee a price for new renewable and nuclear power.
The facts are that we don’t know when oil and gas reserves will start to run out; peak oil may or may not be only decades away. Exploitation will become more and more risky in some of the world’s most politically unstable countries. “We don’t want to be in hoc to these sorts of markets,” Huhne pointed out.
Leave aside the issue of global warming, which often over-dominates the debate. The idea that we will be able to buy gas and oil in 2030 at the same price as today – in real terms – is utterly complacent*. Is it time for the media to reflect that more prominently?
* In fact Decc’s current estimate for oil prices in 2020 is $80 a barrel, compared to $85 today, which seems recklessly low.
UPDATE
uSwitch tell me their survey is out of date. It was published in June 2009 and was based by detailed work by Ernst & Young which examined the cost of replacing existing gas and coal plants as well as new low-carbon energy generation. The website has since updated its estimates and believes the reforms will add about £400 to a typical bill of about £1,200. By my calculations that is around 33 per cent – ie the same as Chris Huhne’s predictions.
Jim Pickard
Kiran Stacey