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July 22, 2011

Government reforms will mean higher energy bills, warns FSB

Government plans to overhaul the electricity market will push up prices for small firms, the Federation of Small Businesses (FSB) has warned.

The Government’s recent Energy White Paper, which aims to attract new investment to upgrade power stations and the UK grid, sets out proposals to introduce carbon pricing, which artificially raises the cost of electricity produced by fossil fuels.

According to the Department for Energy and Climate Change (DECC), the move towards carbon pricing is part of a shift towards encouraging investment into renewable sources of electricity, rather than continuing to rely on non-renewable sources.

But the FSB has warned that future price hikes will be passed on to small businesses by energy firms.

“Energy companies have increased prices sharply over the past five years, with yet more rises over the past few weeks,” said FSB national chairman John Walker. “There is a huge risk that introducing a mechanism to increase electricity prices generated by fossil fuels will further inflate prices as generators pass on the extra costs.”

The Government must put safeguards in place to protect small firms, Walker added, to prevent energy companies from passing on a levy. “We want to see micro-businesses treated the same as domestic users, who are typically given more regulatory protection than commercial users,” he said.

John Cridland, director-general at the Confederation of British Industry also raised concerns about potential costs to business as a result of the new proposals. “Everyone wants to make our energy infrastructure more secure and sustainable for the future, but businesses cannot be expected to write a blank cheque,” he said.

A spokesman for the DECC said that “radical” changes were needed if the UK’s electricity sector was to remain secure and affordable. “Unfortunately, electricity prices are likely to go up but implementing a Carbon Price Floor, which puts a fair price on carbon, will help to reduce costs of electricity in the long-term,” he said.

Legislation would be prepared early next year, the spokesman added, with any new laws passed expected to take effect from 2013.