Energy companies 'to reap £2bn windfall' from green levies deal

Earlier this month The Telegraph disclosed research by the Association for the Conservation of Energy (ACE) claiming companies would save more than expected, leading to a £245m windfall.

But the new analysis for Inca finds the windfall will be much greater because companies will benefit not only from having to install fewer measures - as highlighted by ACE - but also from substantially lower costs for the measures that they do have to carry out. Market prices for some of measures are less than half those assumed by the government.

The research was conducted by AgilityEco, a consultancy run by two former British Gas executives with extensive experience implementing energy efficiency schemes.

Labour’s Julie Elliott MP, shadow energy minister, called on companies to pass on any savings. “It is clear that the Government has underestimated the amount that would be saved by reducing support under the ECO scheme,” she said.

Solid wall insulation bore the brunt of the cuts to ECO targets because it is the most expensive type of insulation. But, in its consultation response to the changes, Inca argues the windfall leaves room for the targets to be doubled without increasing consumer bills.

It also argues that the 8m households in “energy-leaking” solid wall homes deserve help after contributing £2.7bn over the last decade to subsidise insulation for other households.

“At the rate proposed in your consultation, it will take 300 years to get these homes to a decent state of energy efficiency,” it says.

Angela Knight, chief executive of Energy UK, said the green levies deal was based on “the best estimates that both companies and government could make”.

Suppliers were in discussion with government about running costs, she added, although final costs would not be known until the end of the programme.

A spokesman for the organisation, which represents the energy industry, added that they did not recognise Inca's numbers. "The cost of delivering ECO will vary from company to company but the industry welcomes further transparency to make ECO more open and easy to understand," they said.

A British Gas spokesman said: “In terms of the Government changes to ECO, as part of our January price cut we made it clear that we passed all the benefit of the savings to our customers in full. We were the first supplier to announce the price cut and it applied to all customers whether on variable or fixed tariffs."

A DECC spokesperson said it was still analysing responses to its proposed changes to the ECO scheme and hoped to publish its response to the consultation before the summer break.

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