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'Green tax' cuts lower energy bills by £50

Green piggy bank and a lightbulbGovernment reform of "green taxes" on gas and electricity firms should limit the impact of recent price rises on customers. We look at what it means for you.

The average household will pay £50 a year less for gas and electricity as a result of government plans to cut environmental taxes and obligations on energy firms.

The move follows a string of bill increases averaging more than £100 a year from many of the leading suppliers over recent weeks.

Energy price cuts

Several firms have now said they will reverse part of their recent price rises.

British Gas, for example, said that its customers' average 2014 bills would rise by £70 rather than the £123 announced in October.

Ministers have decided that companies will no longer have to fund the Warm Home Discount scheme, which offers subsidies worth as much as £135 a year to those on low incomes.

Instead the scheme will in future be paid for by a crackdown on tax avoidance, according to Chancellor George Osborne.

This means that energy customers will not suffer by being subject to tax rises elsewhere.

Green tax obligations relaxed 

The coalition has also decided to relax the rules around the Energy Company Obligation (ECO).

This programme sets targets for gas and electricity suppliers to provide low-income customers with energy-saving improvements such as cavity-wall installation.

From now on, suppliers will no longer have to offer the service to hard-to-reach households in remote parts of the UK.

Firms will also be given an extra two years – until 2017 – to meet their targets.

Which energy firms are now cutting prices?

So how have the major suppliers reacted to this news?

  • British Gas imposed its latest price rise on 23 November, but the firm says that bills will be cut as of 1 January 2014 as a result of the change in green levies. Its typical customer household will therefore pay £1,391 for gas and electricity in 2014.
  • EDF Energy had already factored in a reduction in green levies when it announced last month a 3.9 per cent average price rise – significantly lower than most of its rivals – to take effect on 3 January.
  • E.ON was the last of the big six suppliers to announce a price rise this winter, finally doing so on 6 December. By waiting until news of the cut in environmental taxes was announced, the firm was able to limit its price hike to 3.7 per cent on average – a rise in gas and electricity costs of around £48 per household. This comes into effect on January 18 next year.
  • Npower's 10.4 per cent average price rise came into force at the start of this month. The firm now says it is calculating how much it can cut bills following the change in green taxes, and has promised not to increase rates in 2014 provided wholesale gas costs do not rise.
  • ScottishPower upped rates by 8.6 per cent on average on 6 December. It has yet to reveal any planned cuts to bills.
  • SSE was the first of the UK's big six energy suppliers to raise tariffs: its average dual-fuel bill - where customers take both gas and electricity from the same firm - went up 8.2 per cent in mid-November. It says that bills will be cut by 4 per cent, or £50, on average at the end of March 2014.

Read Gas and electricity bills: Where does your money go?

Consumers urged to shop around

Money on a utility billKate Rose, head of gas and electricity at Confused.com, welcomed the government's green tax reforms.

But she urged consumers to compare prices from all suppliers to ensure they are on the cheapest tariff.

"Comparison sites such as Confused.com are free to use and display all available tariffs, making it quick and easy to switch to a new tariff or supplier."

"Opting for a dual fuel tariff, paying monthly by direct debit and managing your account on line are all ways to keep your bills low.

"With potential savings running into the hundreds of pounds we urge consumers to act with their feet to ensure they pay as little as possible for their energy this winter."

How to switch energy supplier

  • Use an online comparison site such as Confused.com to compare gas and electricity prices. Enter your postcode and details of your current gas and electricity supplier, including the name of your tariff which you should be able to find on your bill or by giving your current supplier a call. 
  • For the most accurate price comparison, enter your annual usage. You can find this out by calling your current supplier and asking for your usage for the past 12 months, in kilowatt hours (kWh).
  • If you don't know your usage - if you've moved into a new property for example, you'll be asked if you're a low, medium or high energy user. Find out what category you fall into.
  • Enter how you'd like to pay your bill. It is almost always cheaper to pay by direct debit as suppliers offer discounts for customers who pay this way.
  • The search results will show you the cheapest deals for dual fuel tariffs as well as the cheapest deals for gas and electricity separately. It's worth checking out the cost of separate deals as while duel fuel is often cheaper, this is not always the case.

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris



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