2 days ago
British Gas boss warns Miliband against ‘outrageous' energy bill divide
Forcing households with gas boilers to pay higher green taxes than those with heat pumps would be an 'abomination', the boss of British Gas has warned.
In a stark warning to Ed Miliband, Chris O'Shea said that removing net zero levies from electricity bills would punish the poor and amount to a 'terrible distortion of the market'.
It comes amid reports that the Energy Secretary is considering stripping green levies from electricity in a bid to encourage the adoption of heat pumps.
Instead, the costs would be moved on to gas, making a boiler more expensive to run.
Mr O'Shea, the chief executive of British Gas owner Centrica, warned Mr Miliband to resist such an 'outrageous' overhaul and instead focus on protecting billpayers from the soaring cost of net zero.
'It's a preposterous idea,' Mr O'Shea told The Telegraph. 'The idea you'd put the levies on gas bills will mean those better-off people with heat pumps will be subsidised by those poorer people with gas boilers. That's nonsense.
'I think those of us with the broadest shoulders should help those of us who have the most need.
'To put them on gas bills would be an abomination, outrageous and a terrible distortion of the market. It would also be unfair because the people [who have] gas boilers the longest will also be those who can least afford to pay higher bills.
'I have heard the argument that it will encourage more people to use electricity. But encouraging people to use subsidised electricity by forcing gas users to pay just doesn't make any sense.'
Mr O'Shea said the Government should shift the cost of green levies on to general taxation rather than creating an energy bill divide between households.
'Hostage to fortune'
The Climate Change Committee, a Government quango, has urged Mr Miliband to remove the taxes from electricity bills to encourage more people to buy heat pumps and electric cars.
However, experts have warned such a move risks increasing the average gas bill by £120 a year.
Mr Miliband is considering the reforms as part of a radical rethink on clean power, as he fights to defend Britain's goal of reaching net zero by 2050. An announcement is expected this autumn.
Mr O'Shea's plea to protect households with gas boilers came as he warned that Mr Miliband's net zero targets would be challenging.
'I don't think they are a work of fiction, and it's good that we have stretching targets,' he said. 'But even if you were to speak to those who helped to set them, then even they would say it will be difficult. But I don't think it's impossible.'
The Centrica boss also cast doubt over Mr Miliband's pledge to cut household energy bills by 2030, supposedly aided by Britain's move to a greener economy.
Mr O'Shea said he was sceptical that the Energy Secretary's promise to lower bills by £300 this parliament was 'achievable'.
'The energy transition is not cheap and it is not simple,' said Mr O'Shea. 'If it were, then we would have done it already.
He urged the Government to take a more honest approach when it came to net zero.
'What renewables will do is give you more price stability,' he said. 'You will get fewer highs and fewer lows. Home-grown renewables give you more security than imported gas.
'But I wouldn't have made the £300 statement because it makes you a hostage to fortune.'
As Britain's second-largest energy supplier behind rival Octopus, Centrica takes an 'agnostic' view when it comes to net zero, according to Mr O'Shea. That means the company is as comfortable building gas-fired power stations as it is investing in heat pumps.
However, he said the business has abandoned wind and solar investments in the UK because they do not make enough money. Instead, Centrica is exploring wind investments in Ireland.
Mr O'Shea was also critical of Mr Miliband's pledge to ban all new drilling in the North Sea, even though Centrica no longer conducts any exploration activity in the basin.
'I don't agree with the decision,' he said. 'If you take it from an environmental point of view, we import LNG [liquefied natural gas].
'If you produce gas domestically, then it will have a lower carbon content than the LNG that we import. And the reason is the cost of shipping and the cost of turning the gas into a liquid.'
Zonal pricing row
By taking a less fiercely aggressive approach on net zero, Mr O'Shea has set himself apart from Greg Jackson, his counterpart at Octopus, who has made a virtue of being a clean-energy champion.
This distinction came to the fore in recent months amid the fierce debate over zonal pricing.
Unlike British Gas, Mr Jackson was a vocal supporter of plans to divide up the country into different energy pricing zones in an effort to incentivise developers to build wind and solar farms where demand – and prices – are highest.
However, the proposals were highly controversial because they would have in practice meant higher bills in the South for electricity than in the North.
'It has been a very divisive debate,' said Mr O'Shea. 'We did not want a postcode lottery.'
Mr Miliband recently abandoned the proposal, which British Gas believes was the right decision. Octopus disagrees and claims the Energy Secretary missed a vital opportunity to lower bills by billions of pounds.
Mr O'Shea said: 'There was one very, very vocal proponent of it, and I think the benefits were all quite theoretical.
'For a company that purports to put the customer first, I don't know why they would want a system that would be more complex. I think they missed the point.
'I don't know why they went so hard on it and why they were so vicious about the Government's decision. One of their guys made a post on social media saying 'good game, well played'. This is not a game. People are struggling to pay their energy bills.
'I think that a lot of things have become too polarised. And energy is no different.'
Rough decisions
Now that the battle over zonal pricing is over, Centrica is turning its attention to Rough, the gas storage facility it runs 18 miles off the coast of East Yorkshire.
It accounts for about half of the capacity the UK has to store gas. However, Mr O'Shea has warned that Rough risks closure by the end of the year unless ministers agree to help fund the site's redevelopment.
'Rough is going to lose about £100m this year and we can't sustain that,' he said. 'I think we have probably got to see something by the end of this year.
'If we get towards the end of the year and we've got a situation whereby we've got no prospect of making a profit, then we're just throwing good money after bad. It would be like a charitable donation, and that's not our business.'
Rather than securing a handout, Centrica has asked ministers for a so-called cap and floor mechanism to help transform the 40-year-old site to store hydrogen as well as natural gas. This would provide a guaranteed minimum revenue level for the project - the floor – as well as limited excessive profits – the cap.
Centrica has already stopped filling the facility amid mounting losses. Mr O'Shea said a full closure would involve the loss of hundreds of jobs.
As well as impacting the local community, such a move threatens to deal a hammer blow to Britain's energy security, just years after the country recovered from one of its worst-ever energy crises following Russia's invasion of Ukraine,
Worse still, it also sends the wrong message to our allies in Europe, according to Mr O'Shea.
'If Rough closes, then the UK has just six days of gas storage available, compared to 100 in France, Netherlands and Germany.
'If we get into a crisis and the UK hasn't invested in gas storage, then I am not sure it will flow from the Continent.
'Politically, if you're the prime minister of France or Germany and you look at a country that hasn't invested in gas storage, then I am not sure that will work. There is a need for us to recognise the risk that no one likes a freeloader.'
