"Power bills to soar for the next 17 years"

Energy and water bills are set to rise faster than inflation and wages for the next 17 years, the National Audit Office warns today.



It says major infrastructure projects, such as the switch to green energy, building nuclear power stations and new sewers, will cost the nation £310billion by 2030.

Almost £208billion – 67 per cent of the total – will have to be funded by families through their bills, according to government plans.

In simple terms the huge cost works out at an extra £8,000 per household – on top of what energy and water bills would normally be – over the next 17 years. The news will be a punishing blow to millions of families who continue to suffer a cost of living squeeze despite improvements in the wider economy.

The price of essentials such as heat, light, food, water and transport has risen faster than wages for at least the last five years causing real hardship.

The research published today suggests this pain is set to continue until at least 2030.

Margaret Hodge, chairman of the Commons Public Accounts Committee which oversees the work of the NAO, said there is a danger that bills will become ‘unmanageable’.

She said: ‘Households up and down the country are already struggling to cope with rising water and energy costs.

‘I have serious concerns that government is taking decisions on infrastructure, banking on hard-pressed consumers to foot the bill, without knowing whether households will be able to afford to pay.’

The NAO warns that the Government and utility regulators have failed properly to calculate the impact of the huge infrastructure projects on bills.

It states: ‘High levels of expected new investment in infrastructure mean that energy and water bills may rise significantly from current levels.

‘This is likely to hit those households with incomes in the lowest 10 per cent particularly hard.

‘The available projections suggest that increases in both energy and water bills will continue to outstrip inflation, on average, up to 2030.

‘This is particularly concerning, given that energy and water bills have increased significantly in recent years, while incomes have not.’

The head of the NAO, Amyas Morse, said too little attention has been paid to the impact of passing on the huge costs to consumers.

A raft of green taxes and supplements are already being applied to energy bills to finance a shift from coal and gas to wind and nuclear power and so cut the nation’s carbon emissions.

The NAO said the UK is committed to increasing the proportion of energy it gets from renewable sources by 3.7 times by 2020 in order to meet EU targets.

This same regime involves adding a supplement to all bills under the ECO scheme to raise money to provide free energy saving measures, such as loft insulation and efficient boilers, for the poor.

The NAO says these supplements will add up to £221 a year extra on every household’s energy bills by 2030 in terms of today’s prices.

Separately, water companies, most of which are now foreign owned, have been allowed to increase bills ahead of inflation to build new sewers, tackle leaks and meet EU requirements to clean up the effluent released into rivers and the sea.

This is set to continue under a formula which allows price increases above the general rate of inflation on a five-year rolling pattern.

Energy bills have risen by 44 per cent ahead of inflation and wages since 2002, while the cost of water has gone up by 21 per cent above incomes, according to the NAO. Lib Dem Energy Secretary Ed Davey yesterday insisted the energy industry, rather than the Government, was to blame for higher bills.

He said executives risk being put in the same category as greedy bankers.

He told an energy supplier conference that profits ‘cannot come at the expense of the elderly, the vulnerable, and the poorest in our society’.

He warned: ‘Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders.

‘Fair or not, they look at the big suppliers and they see a reflection of the greed that consumed the banks.’

While Mr Davey has been keen to shift the blame for higher bills to energy firms, Environment Secretary Owen Paterson has turned his fire on water companies. Last week, he wrote to all the major water suppliers asking them not to impose a series of inflation-busting increases in tariffs from next April.

In fact, the increases have already been approved by industry regulator Ofwat under a long-running formula and it seems unlikely that firms will refuse to apply them.

A government spokesman said: ‘Decades of underinvestment have left the UK struggling with insufficient energy infrastructure, but we are committed to fixing the failures of previous governments, and to making the difficult decisions that will allow us to have the infrastructure we need.’

However, a source said ministers are acutely aware of the impact of the costly levies on families and indicated some of these would be rolled back in the Chancellor’s autumn statement.

Energy industry leaders insist they are as unhappy about the taxes and supplements added to bills as customers. They have likened them to a poll tax and called for some to be shifted to general taxation.