The government has now confirmed changes to energy levies which, it claims, will see households saving an average of £50 a year.
Announced as part of the 2013 Autumn Statement, a rebate will be established to save the average customer £12 on their bill for the next two years, worth a total of £600m. The Warm Homes Discount scheme will also continue, providing vulnerable households with a £35 rebate on their energy bill.
Mr Osborne said the announcement would not add a penny to the taxpayers’ bill showing "going green does not need to cost the earth".
The Energy Company Obligation (ECO) scheme will be scaled back in order to provide further cost savings on energy bills. ECO places legal obligations on the larger energy suppliers to deliver energy efficiency measures such as insulation to domestic energy users, with a particular focus on vulnerable consumer groups and hard to treat homes.
Originally intended to finish in March 2015, the scheme will now be extended until March 2017, meaning that energy suppliers have an additional two years to meet their targets. This, government said, will result in a £30 to £35 saving on the average household bill, since the scheme is funded through levies on all consumer energy bills.
Neil Marshall, chief executive of the National Insulation Association (NIA), expressed concerns that the cuts to ECO will impact on the number of insulation measures installed each year, in particular the proposal to cut the number of solid wall insulation installations from 65,000 households to just 25,000 a year. “Half of those households in fuel poverty live in properties with solid walls and this cut could have a very serious impact on those households in the greatest need of help,” he said.
Meanwhile the UK Green Building Council described the changes as bad news for both those in fuel poverty and construction industry workers, as it warned the levy changes could put jobs at risk. Under the new measures, the number of solid wall insulation installations required under ECO will be reduced to 100,000 over the new four-year period, or 25,000 per year. In 2012 alone, before the introduction of the ECO scheme, the UK Green Building Council pointed out that the industry installed 80,000 solid wall insulation measures.
Electricity distribution network companies have also agreed to reduce network costs in 2014/15, allowing a further one-off £5 reduction on the average electricity bill.
All the major energy suppliers have confirmed that they will pass the benefits of these changes to their customers.
Government has also announced new schemes to encourage landlords, public sector buildings and people who move house to improve the energy-efficiency of their properties.
In future, when people buy a new home, they could get up to £1,000 from the government to spend on important energy-saving measures, or up to £4,000 for particularly expensive measures. This scheme will be available to all people moving house, including those who don’t pay stamp duty. Estimates suggest this could help around 60,000 homes a year over three years.
A scheme to support private landlords to improve their properties will also be introduced, with £90 million also being spent over three years improving the energy efficiency of schools, hospitals and other public sector buildings.
Levies providing support for existing low carbon energy projects will not change, such as the Renewables Obligation (RO), Contracts for Difference (CfDs) and Feed-in Tariffs (FITs).
Energy & Climate Change Secretary Edward Davey said: “Energy bills are a big concern for many people, which is why we’ve been working to reform the energy market, increase competition and make it easier for people to shop around and switch supplier. Today’s announcement confirms a serious, workable package, which would save households around £50 on average. Today’s package also ensures energy companies are not off the hook. They will keep up their efforts to help people in fuel poverty cut their bills by making sure their homes leak less heat, and will have to be more transparent about what they’re spending on social and environmental measures. Next year, our competition test will forensically examine what more we can do to get prices down through ferocious competition.”
The construction industry has given a mixed reaction to the announcement.