techUK coordinates letter calling for energy levy reform inquiry

techUK has sent a letter, backed by other trade associations including RenewableUK, REA, Energy UK, CBI, Make UK, and ADE, to the Treasury Committee Chair calling for an inquiry into energy bill levy reform.

This a response to the commitment by Treasury of a new framework for scrutinising energy bill levies in the Autumn Budget, which will be the third such framework since 2010 – following the introduction by previous governments of the Levy Control Framework and the Control for Low Carbon Levies.

The UK faces the highest industrial energy prices in the IEA, averaging around 46% higher than other members and compromising our competitiveness and growth objectives. This is not caused primarily by wholesale electricity prices, but instead the accumulation of policy costs such as legacy renewables subsidies on final bills. These levies fall predominantly on electricity bills and are set to increase through the addition of new costs and the expansion of existing schemes, including upgrading the energy grid – as demonstrated in Ofgem’s RIIO-3 price control, which will see investment grow to an estimated £90 billion by 2031. For example, a 20MW data centre site will see a fourfold rise in transmission charges by the end of the decade, from £1.1M to £4.4M.

Whilst the Autumn Budget included important announcements to reduce household bills, through scrapping the Energy Company Obligation and moving 75% of Renewable Obligation to general taxation, no such reforms were introduced for industry or non-domestic consumers.

High electricity prices exacerbate fuel poverty, stunt economic growth, and – as the Climate Change Committee has stated – act as the main barrier to achieving net zero by 2050. Small businesses, which do not have sizeable balance sheets or purchasing power, are especially hard-hit by increases in energy prices. Nearly half (46%) of small firms cited their utility bills as a driver of changing costs over the last 12 months.

techUK, along with these other trade associations, believes a public inquiry with voices and evidence from stakeholders across the economy is vital. We are calling for a Treasury Committee inquiry in the New Year to examine why the previous two frameworks ultimately failed and inform the development of the new framework to ensure it is successful.

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