E.ON UK has today provided details of the savings which will result from the proposed changes announced by the Department of Energy and Climate Change (DECC). While the company will have to take action on bills in the near future due to other rising costs, any rise will take all of these changes into account as they alleviate some of the cost pressures E.ON was facing.
Details of the proposed changes announced by the Government:
- The Government has made a number of changes: providing a rebate for Warm Homes Discount, focusing the Energy Company Obligation (ECO) scheme and squeezing network costs which together deliver a reduction in costs to customers' bills. The other environmental levies, such as the Renewables Obligation are unaffected, but the changes made in ECO will more than offset the expected rises in these items between 2013 and 2015 - so overall there will be a meaningful net reduction in environmental and social costs.
- The changes announced (if enacted) mean that the prospect of further price rises in the next 18 months due to the Government's environmental and social obligation programmes has receded. It is still the case however, that wholesale prices and network costs, which neither we nor the Government control, may rise.
What do these proposed changes mean for E.ON customers?
- E.ON has not announced a price rise since December 2012 and once again is the only major company to hold off for so long into the winter.
- The result of these changes should mean our customers will pay less next year than otherwise would have been the case. We are working through the details and will provide an update in due course.
- E.ON can also provide customers with the assurance that it doesn't expect to have to raise prices as a result of social or environmental obligations in the next 18 months.
- There remains a risk, however, that increases in network charges or wholesale energy costs for example could force a price increase but the company (E.ON) very much hopes that situation does not occur.
Commenting on the announcement made today by the Department of Energy and Climate Change (DECC) regarding changes to government programmes, Tony Cocker, Chief Executive of E.ON UK, said:
"We welcome the Government's announcement which will remove some costs from customers' bills and offer some reassurance through to 2015. It also enables more cost-effective delivery of the Energy Company Obligation. Nevertheless, we are concerned about some elements including the rules for Solid Wall Insulation which, we believe, may threaten a sustainable and growing part of the industry and exclude some households from the potential to have their homes made warmer as a result of ECO, as well as the lack of change to the Carbon Price Floor.
"Similar to last year, we have aimed to defer any increase and keep it as low as possible - and we have been able to do so partly as a result of our success in ECO. I can be absolutely clear that the changes announced by the Government and the savings they bring will be factored in to any price changes. Additionally, whilst there can be no guarantees, the likelihood of further price rises over the next 18 months caused by increases in the cost of delivering social and environmental obligations has receded today due to action taken by this Government."
Addressing some of the proposed specific changes to the Energy Company Obligation, Tony Cocker continued:
"We are proud of the efficient way we have been delivering ECO and therefore the help our colleagues have given many customers with their energy needs. At no point did we ask for a radical change to our environmental and social obligations, beyond moving their funding to general taxation as a more progressive route, and removing the administrative burdens, rather we were getting on and delivering them, as Ofgem's recently published statistics show.
"Nevertheless, we do welcome further certainty on the future of the scheme and are also pleased that some of the measures announced today help to avoid many of the issues created by changing the rules ‘half-way through the game'.
"These include so-called ‘levelisation' measures included in the proposals which mean that our customers and our company can be treated in a fair fashion with regard to the rules being changed halfway through the legally binding obligation we sought in good faith to deliver. We also understand, and hope, that the arrangements regarding trading of ECO will be addressed as part of the consultation process to allow a more workable situation, and therefore more cost-effective delivery.
"On the other hand, we are disappointed that a decision has been taken proposing a very low backstop minimum level of solid wall insulation. This change could present a significant threat to the prospect of a sustainable industry in that arena and reduces the number of customers in older, single wall properties who will benefit, many of whom would be classed as ‘vulnerable'. We note and welcome that the Government will provide new incentives for people to insulate their homes and for landlords to insulate their properties, which should help individual customers and may provide some additional support to the solid wall insulation industry.
"In the coming weeks and months we hope the Government will continue to examine areas of policy where changes can be made that would further benefit our customers, such as the Carbon Price Floor.
"This review was an opportunity to remove the Carbon Price Floor which is simply a tax and a subsidy for owners of old nuclear and hydro plant, and increases prices for almost all households and businesses in the country. We are disappointed that the opportunity has not been grasped to remove or review this element which is basically without benefit to customers or the environment. We can understand that the Chancellor needs to balance the books and so needs the tax revenue, although we would prefer if he collected it in a different way, but we don't understand why he continues to subsidise old nuclear and hydro stations, for which our parents have already paid through their taxes.
"In meeting all our obligations and responsibilities, we promise to continue to be diligent and carry out our work in an efficient and careful manner. That is what our customers expect. That is what we demand."
Ends
For more information contact:
Scott Somerville (07540 817 936)
Andrew Barrow (07515 752 759)
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