Consumers have not 'fully benefited' from falling energy costs, says review

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The cost of energy in the UK is "too high" and is higher than it needs to be to meet targets to cut greenhouse gas emissions, an independent review has found.

A study by Oxford University economics professor Dieter Helm, which was commissioned by the Government, found households and businesses had not "fully benefited" from the falling costs of gas, coal, renewables or efficiency gains.

The review into the cost of energy in the UK warned policies, regulation, and the "continued exercise of market power" had prevented the full benefits being felt.

Blaming the Government for getting "into the business of 'picking winners'," the review suggested measures including simplifying interventions in the market and bringing in a "universal carbon price" across the economy to cut emissions.

Prof Helm also argued that industry should be exempt from the "legacy costs" of subsidy schemes to promote low carbon power, the cost of which should be clearly marked on consumer bills, and the programmes should be gradually phased out.

The report said: "Households and businesses have not fully benefited from the falling costs of gas and coal, the rapidly falling costs of renewables, or from the efficiency gains to network and supply costs which come from smart technologies.

"Prices should be falling, and they should go on falling into the medium and longer terms."

The Government earlier this month published plans to bring in a price cap on consumer energy bills, amid concerns they are too high.

Responding to the report, Business and Energy Secretary Greg Clark said: "Homes and business depend upon reliable, affordable power and the Government is ambitious in its plans to keep costs as low as possible for them over the coming decades.

"We are already taking significant steps to upgrade our energy infrastructure as part of the Industrial Strategy and have published draft legislation to cap poor value energy tariffs helping millions of consumers across Britain.

"I am grateful to Professor Helm for his forensic examination. We will now carefully consider his findings."