Energy Reforms Could Push Up Family Bills

Consumers could face higher bills because of Government plans to change the energy market, a group of MPs has warned.

The Treasury, as part of the draft Energy Bill , has said it will not underwrite new investment in nuclear and renewable power facilities.

This could increase the cost of borrowing for energy companies, who will then pass the rise onto customers, according to the Energy and Climate Change Select Committee.

The draft Bill sets out plans for long-term contracts to give power companies a guaranteed price for the low-carbon electricity they produce.

This is intended to cut the risk of investment in expensive projects with high up-front costs, such as nuclear reactors and wind farms.

But firms capable of providing the infrastructure are likely to be deterred by the Treasury's U-turn about underwriting new investment.

Committee chairman Tim Yeo warned that the Government is in danger of "botching" its plans to boost clean energy by refusing to back new contracts.

He told Sky News: "The Government should have stuck with its consultation proposal last year, which was that the Treasury would stand behind these so-called contracts for difference.

"That is the way these low carbon energy producers would be guaranteed a price for the electricity which they produce.

"Government backing for those contracts has been withdrawn in the draft Bill and that means there is a small element of credit risk attached to those contracts.

"That will raise the cost of the capital to the companies investing and therefore that extra cost gets passed through onto energy bills."

The plans in the draft Bill amount to the biggest shake-up of the energy industry since privatisation in the 1980s and are designed to keep the lights on for decades to come.

Ministers hope to reduce reliance on coal-fired power stations and imported energy, and boost support for renewable sources like wind, wave and solar, and carbon capture and storage.

The committee spent five weeks taking evidence as part of the pre-legislative scrutiny process before final proposals are put forward later this year.

Mr Yeo is also warning that the plans could increase the power of the Big Six energy companies instead of widening competition.

"The Government has a lot of work to do over the summer to make sure the Bill is fit for purpose in the autumn and is not subject to any further delays," he said.

Energy Secretary Ed Davey said: "We are determined to use the pre-legislative scrutiny period to develop a robust and effective Bill with the interests of both consumers and investors at the heart."