June 22, 2018 / 11:22 AM / a month ago

UK homes could face higher power costs as government looks to lower business burden

LONDON (Reuters) - Britain is considering giving more companies exemption from schemes to help pay for renewable power, but warned the move could lead to higher costs for households and non-exempt firms.

British businesses have long complained they face some of the highest electricity costs in Europe and the government is looking for ways to support the business community following its vote to leave the European Union.

But the government also wants lower electricity prices for households, and plans to launch a price cap on the most widely used tariffs through regulator Ofgem by the end of the year.

An impact assessment of the business exemption plans, published alongside a consultation by Britain’s Department for Business, Energy and Industrial Strategy (BEIS) on Friday, said the proposals could add 1 to 7 pounds a year to household bills.

“A rise in electricity bills may decrease household’s disposable income and have a disproportionately large effect on poorer income groups,” the impact assessment said.

All of Britain’s big six energy providers have announced price increases this year and partly blamed rising policy costs such as renewable subsidy schemes recouped by the government via levies added to both domestic and industrial electricity bills.

Most companies that use a lot of electricity, with an energy intensity of 20 percent, are currently eligible to seek exemption from the majority of indirect costs, or higher electricity bills relating to renewable subsidies.

Energy intensive companies, below the 20 percent threshold and not eligible for the exemption “continue to face an uneven playing field with international competitors,” the consultation said.

The consultation considers lowering the energy intensity threshold for eligible companies to those with 10, 15 or 17 percent energy intensity, and offers different ranges of exemption.

Under the various scenarios companies that could become newly eligible for the scheme could save on average 1.2-2.8 million pounds a year on their electricity bills, the report said.

“There may be greater investment flows in the UK, since newly eligible firms face a fall in their production costs. This may help to retain high skilled labour in the UK,” the report said.

The consultation on the plans is open until September 7, BEIS said.

Reporting By Susanna Twidale; Editing by Elaine Hardcastle

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