To recover the cost of energy policies which support the transition towards a low carbon energy system, levies are applied to household and business energy bills. This briefing note focuses on the levies applied to households.
Household energy policy costs
Energy policy costs are applied to household electricity and gas bills, equating to £132, or 13% of the average energy bill in 2016. This research highlights how low-income households are hit hardest by the current arrangements as the poorest households spend 10% of their income on heat and power in their homes, whereas the richest households only spend 3%, so any increase in prices hits the poor disproportionately.
Energy service demands in the UK
Household electricity and gas use represents only 12% of total final UK energy use. “Total” energy use includes all the energy used to provide households with the products they buy and the services they access, and includes energy embodied in imports. If we calculate the full supply chain energy embodied in all goods and services, the lifestyles of the richest require nearly four times more energy than the poorest, but because levies are only raised on household electricity and gas bills the richest only pay 1.8 times more towards the energy policy costs.