The proposals laid out in the Bill include an increased green energy levy on gas and electricity customers, as well as plans, first revealed two weeks ago, to force all energy suppliers to offer just four tariffs for each fuel type.
The Government also has long-term ambitions to require providers to put customers on the best tariff, although details of what constitutes ‘best’ and how the process would be managed remain sketchy.
Here, we explain what the changes sweeping the energy market will mean for you.
The cost of the green energy levy
Under the Government’s proposals to boost green energy and move away from using fossil fuels such as gas, energy firms will increase the amount of money they add to customers' bills to pay for renewable power, nuclear and other environmental measures.
Accordingly, the green energy levy will jump from its current level of £2.35 billion per year to £7.6 billion per year by 2020.
Green measures currently add up to £20 to the average domestic gas and electricity bill of £1,249 a year. Experts believe the annual cost to the consumer is likely to rise by at least £100 a year.
However, the Government argues that the long-term benefits are worth the short-term pain and that the energy efficiency policies included in the Bill will knock £94 a year off the average household energy bill by 2020 anyway.
Ed Davey, Energy and climate change secretary, said: “The impact from supporting this green policy is only 2% on people's bills at the moment. That will grow, but we are still talking about under £100 in 2020."
However, consumer groups are worried about the impact on households already facing sky-high energy bills.
Clare Francis, our consumer finance expert, said: “While there is clearly a need to develop and invest in the provision of renewable energy and improve the existing ageing energy infrastructure, this comes at a time when according to our site users, rising energy bills are the biggest financial concern for many households.
“Rising energy prices are here to stay and consumers need to fight back against these higher costs by taking action now. One of the simplest ways to cut your bills is to switch to a cheaper energy tariff. By moving onto a fixed online deal, not only can you beat the recent price hikes, but you can also protect yourself from further rises for at least 12 months.
“Switching is much simpler than many people think and takes just a few minutes. It doesn’t involve installing new cable or meters – all you are doing is changing the company that supplies gas and electricity to your home. The switch is done behind the scenes by the new provider.”
Simpler tariffs for all
While consumers will shoulder the cost of the proposed increase to the green energy levy, the Government hopes the Energy Bill will also help to reduce energy bills for many households.
This is due to plans to force energy providers to simplify their products and switch customers on to the ‘cheapest’ tariff.
Currently, energy companies offer hundreds of tariffs and pricing options that depend on how you pay, how you manage your account and where you live.
Under the government’s plans to simplify the market, however, each supplier would be allowed to offer just four "core" tariffs for each fuel type.
These would include one fixed-price deal and one standard variable rate, plus two other tariffs chosen by the company – such as a green energy deal.
In a bid to prevent vulnerable customers overpaying, the government also wants utility companies to move customers automatically on to their cheapest "core" tariff, rather than relying on consumers to switch.
There are concerns that the new ‘core’ rates would be comparable to those paid by most existing customers now, with cheaper rates disappearing.
The Government’s proposals for simpler energy tariffs will not come into force until at least 2014. Consumers keen to cut their bills and reduce the impact of the green energy levy are therefore being urged to take advantage of cheaper tariffs now.
Independent research shows that 10% of MoneySupermarket users slice an incredible £200 off their annual bills by switching.
So whether you want to protect yourself from energy price hikes with a fixed-price plan or slash your bills by opting for the cheapest possible plan, click here to find the best deal for you.
Save energy, save money
Clare Francis also urges energy customers to implement their own energy-saving measures: “As well as moving onto a cheaper price plan, you can also slash costs by becoming more energy efficient,” she says.
“There are loads of simple steps you can take which, collectively, can add up to significant savings. With average household energy bills now exceeding £1,300 a year, and today’s announcement likely to see this increase further, it’s time to take advantage of the available savings now and not delay.”
MoneySupermarket's top energy saving tips
- Turn your thermostat down. By reducing your room temperature by 1°C you could save 10% on your annual heating bills.
- Switch off and save. Don't leave electrical appliances on standby as they still use power. Make it a nightly ritual to ensure all lights and appliances are off. For example, leaving your computer on 'sleep' means it is still using 75% of its energy.
- Almost 25% of heat is lost via poorly insulated roofs. An insulated loft can knock £175 off your annual energy bill, while cavity wall insulation could save a further £135. You might even be able to get your loft and cavity walls insulated for free as many energy firms have insulation offers. Local councils also often have grants available for pensioners and those on low incomes to insulate their homes.
- Only heat only the rooms you use. Switch off radiators that aren’t providing real benefit.
- Close your curtains as soon as dusk falls - they keep the heat in and are one of the simplest and easiest ways of cutting back on heating bills.
- Change to energy-saving light bulbs. You can save up to £40 over the lifetime of the bulb.
- Watch out for draughts around doors (keyholes, letter boxes, gaps in doors and windows). Draught excluder packs are available from most DIY stores.
- Fit double-glazing. This is a substantial investment but it should cut heat-loss through windows by 50%.
- Don't fill your kettle each time you make a hot drink. Only use the water you need. It will be quicker to boil and use less energy.
- Take showers rather than baths. A shower uses around a third of the water of a bath.
- If you use a washing machine turn the temperature down to 30°C. Today's washing powders are so efficient they do not need to be used at high temperatures.
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