MPs have called for greater parliamentary oversight of subsidies for renewable energy schemes that are set to rise by nearly £7.6bn a year by 2020
A report by the Energy and Climate Change select committee, published yesterday, called for MPs to have a greater oversight of the levy control framework, which caps the amount of money the government can add to people’s energy bills.
The levy control framework includes two of the government’s main renewable energy support mechanisms: the feed-in-tariff, which is mainly aimed at small-scale energy schemes; and the renewable obligation, which supports large-scale renewable power schemes.
The warm homes discount, which subsidies energy bills for low income households, also falls within the framework.
The Energy Companies Obligation (ECO) is also funded through a levy on energy bills but sits outside of the framework.
The amount the government can raise under the levy control framework is controlled by the Treasury and is due to rise from £3.2bn in 2013-14 to £7.6bn in 2020.
As the levy control framework is not technically taxation, as the government never receives the money as the schemes are managed by the energy companies, the spending is not published in the Department of Energy and Climate Change’s (DECC) annual budgets.
But a report select committee report said that the levy control framework was “effectively spending and taxation” and current arrangements for oversight were “inadequate”.
It said that “in the light of public concern over the cost of energy bills” there needed to be “transparent arrangements which ensure that parliament has adequate oversight of how these funds are raised and spent”.
The committee suggested that a single annual report giving budgeted and actual cost of the framework needed to be produced by DECC and include “easily identifiable ‘costs per customer’ for each scheme on a consistent basis across years and between reports, including information on the impact that government decisions have upon requirements over time”.
Sustainability expert David Strong said the framework itself was “fundamentally flawed” as a way of funding renewable energy schemes and needed a “root and branch review”.
He said the framework was a “perverse market mechanism” because it demanded that energy companies help people buy less of their product without any reward and to work it would need to be tied to the firm’s ability to raise prices.