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Taking another look at ECO

The spotlight has been beaming down on green levies over the past few weeks; critics want them removed from consumer energy bills immediately to cut costs, whilst advocates argue that they are vital in the creation of a low carbon energy market.

15th November 2013    |     Peter Rolton: Chairman, Rolton Group

In the most recent turn of events, several energy companies have been accused of blackmail as they announce plans to increase prices by smaller increments with the caveat that they will rise further if green levies are not scrapped. So what’s this fight about?

The trouble with so many raised voices surrounding the subject is that the basic facts of the matter can become obscured by rhetoric, which is ultimately damaging when you’re looking to make an informed judgement. Instead of thinking purely in terms of short-term sterling cost, I propose to take a look at what the most expensive levy, the Energy Company Obligation (ECO), is used for.

In terms of crises currently facing the UK, fuel poverty is one of the largest elephants in the room. Thousands of people struggle in dire straits every winter to keep themselves at a bearable temperature, and the problem gets worse year on year. I’m not talking about the need to throw another log on the fire or casually turn up the thermostat, either; it can become a matter of life or death for the nation’s poorest homes.

From 1996 to 2006, fuel poverty figures dropped steadily, but have been on an alarming upwards trajectory in recent years. This is at least partially because the benefits typically claimed by the nation’s poorest households are tied in to Retail Price Index (RPI), whereas the fuel they struggle to pay for is not and this allows it to rocket away from affordability. Whilst the rising cost of energy bills doubtless have an effect on the degree to which a household can be kept warm, there are some measures that can instantly improve the situation. This is where the money accrued through ECO comes in.

Free boilers and insulation are currently being given out in schemes funded by the levy across the UK as councils partner up with energy suppliers to offer home improvements to those who need it most. A good example of this is the Heataborough initiative, which is in operation for the next five years in partnership with British Gas offering home improvements to those who need it most in and around the city of Peterborough.

It’s easy to sit back and talk in abstract terms about green levies, because this veils their importance behind immediate monetary cost. The reality, however, is that they offer relief to those who can’t provide it for themselves. Nobody wants to pay over the odds for their energy, but the bigger picture here is worth further investigation; green levies should be seen as an investment in our future, not an unwanted expense in our present.

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