Government insists green energy drive will SAVE households £100 on gas and electricity bills by 2020

By Tara Evans

Published: 09:15 EST, 29 November 2012 | Updated: 14:12 EST, 29 November 2012

The Government has set out its long-term proposals for the UK energy industry today, claiming that they will keep household energy bills lower over the next decade than would the status quo.

Presenting the long-delayed Energy Bill to parliament, Energy Secretary Ed Davey said utility firms would be allowed to increase the 'green' levy from £3bn to £7.6bn a year by 2020, which according to most estimates could increase annual household bills by £100.

However, Mr Davey maintained that household bills would be 7 per cent or £94 a year lower by 2020 than they would have been without the Bill's proposals. He argued that the savings would come from measures to improve energy efficiency and reduce usage, and because the current dependency on gas exposes households to volatile prices.

Change: Energy secretary Ed Davey making a statement today in the House of Commons on the changes set for the future.

An estimated £110billion is needed in the next decade to renew the UK's ageing electricity infrastructure, with much set to go into low-carbon power sources such as wind farms.

However, big companies that use a lot of energy could be exempt from the extra costs of the switch to renewable energy, which might leave some domestic users feeling they are footing the green bill.

Mr Davey told the House of Commons: 'In an era of rising global energy prices by shifting to more home grown sources of power and by becoming more energy efficient, we can cushion our economy and households from the fluctuations of world gas markets. 

'We intend to underpin this with reforms to the retail market to simplify tariffs and make sure consumers are able to get the best deal for them.'

Audrey Gallacher, from Consumer Focus, said: 'This Bill represents one of the biggest changes in the UK energy market since privatisation, yet many of the important details are still to be decided.

'What customers will be most worried about is how this will increase their bills – so the Government must make clear how they will control costs to the consumer.'

'Customers recognise that making our energy supply greener and more secure will come at a cost. But given the huge sums involved and the extra costs consumers will bear, people need guarantees that they are getting value for money.'

Bleating good: An estimated £110 billion is needed in the next decade to renew the UK's ageing electricity infrastructure, with much set to go into low-carbon power sources such as wind farms.

Mr Davey said that he was 'absolutely determined' to more than compensate for that by expanding efforts to encourage energy efficiency measures and lower energy demand.

A 10 per cent reduction would save £4billion in 2030, the Department for Energy and Climate Change (DECC) calculates, and reduce carbon emissions equivalent to those of a large city in a year.

Among ideas included in the two-month consultation are financial incentives for firms and individuals that install more efficient equipment, such as better freezers in supermarkets.

Energy Bill: The Government will take additional powers so that if necessary, they can promote greater competition and liquidity in the wholesale market.

Firms could also be paid to commit to permanent reductions in their electricity use, and an obligation on energy firms to help secure efficiencies extended to cover business premises.

Better labelling of products and an awards scheme to highlight firms that use only highly-efficient products are also included in the consultation.

Officials said any new measures would have to be carefully worked out to avoid undermining any of the existing schemes, such as the Green Deal.

The plans also include giving new powers to Government, so that if necessary, they can promote greater competition and liquidity in the wholesale market.

As well as the proposals during the passage of the Bill into law a number of additional clauses will be included. These include proposals to reduce the number of energy tariffs that companies can offer.