Public Accounts Committee Criticise Lack Of Control Of Levy Control Framework
By Paul Homewood
h/t Philip Bratby
A damning report by the Public Accounts Committee on green energy schemes:
Forecasting Framework costs "poor"
The recommendation comes in a report examining the Levy Control Framework, which is intended to help control the costs of three government schemes to support low-carbon generation.
The Framework sets yearly caps on the forecast costs of the Renewables Obligation, Feed in Tariffs, and Contracts for Difference—schemes funded through levies on energy companies and ultimately paid for by consumers via energy bills.
The Committee concludes the Framework has "suffered from a lack of transparency, rigour and accountability" and forecasting of its costs has been poor.
£110 expected to be added to household energy bills in 2020
The government department responsible (formerly the Department of Energy & Climate Change, now the Department for Business, Energy & Industrial Strategy) continues to expect to overspend the Framework budget.
The report states that as a result, these costs are likely to add around £110 to the typical household’s yearly energy bill in 2020, £17 more than budgeted for.
The Committee is concerned there is a "culture of optimism bias" in the Department, having also highlighted "wildly optimistic" forecasts of demand for Green Deal loans in its Report from July last year, Household energy efficiency measures.
Department urged to "foster a culture of openness and transparency"
It urges the Department to "foster a culture of openness and transparency" around its consumer-funded energy policies and work with HM Treasury to demonstrate the schemes provide value-for-money.
The report states:
"In July 2014 Government agreed to provide Parliament with an annual report on the impact of policies on energy bills, but has not done so since 2014.
The consumer-funded policies report which the Department published a few days before our evidence session on the Framework is not an adequate substitute for a full report on consumer bills: for example, it does not show the net impact of policies once cost-saving effects are included."
Meg Hillier MP, Chair of the PAC, said:
"Bill-payers deserve to know whether or not the energy schemes they fund represent good value.
The Government has failed to meet its commitment to report annually on the impact these policies are having on bills. Current arrangements just aren’t good enough.
At the same time, the Government expects the cost of levies to continue to bust the budget—meaning customers will pay more than expected.
This is a result of poor forecasting and further evidence of excessive optimism in the implementation of energy policy.
Government must take action to address this and also ensure customers can see clearly what they are paying towards existing and future schemes through their bills."
As we know, although the impact on household electricity bills may be £110, the true cost to households is more than three times as much, when higher electricity prices have fed through into the price of goods and services, fares, taxes etc.
But what I find most amazing is how the PAC has pussyfooted around the real issue, that all of these costs are arising from the demands of the Climate Change Act. Meg Hillier, of course, has been a Labour MP since 2005, and helped to push Ed Miliband’s Act through Parliament.
Instead of now challenging the root cause of the problem, she and her Committee criticise the government for “poor forecasting”. This is actually the least of the problems, since the real issue with forecasting is knowing what the market price of electricity will be in future, something nobody knows.
As for the comment that bill-payers deserve to know whether or not the energy schemes they fund represent good value, I can only ask her what planet she is living on. Subsidies for renewable energy can never represent good value for money.