Levy Control Framework ‘needs to give more value for money’

The government must do more to demonstrate the value for money of consumer-funded energy schemes, says a new report from the Public Accounts Committee. The recommendation comes in a report examining the Levy Control Framework, which is intended to help control the costs of three government schemes designed to support low carbon generation.

The Framework sets yearly caps on the forecast costs of the Renewables Obligation, Feed-in Tariffs, and Contracts for Difference – schemes funded through levies on energy companies and ultimately paid for by consumers via energy bills. These levies have been blamed by some suppliers as the main cause of high energy prices.

The Committee concludes that the Framework has: ‘suffered from a lack of transparency, rigour and accountability’ and that forecasting of its costs has been poor. The government department responsible (formerly the Department of Energy and Climate Change; now the Department for Business, Energy and Industrial Strategy, BEIS) continues to expect to overspend the Framework budget. The report states that, as a result, these costs are likely to add around £110 to the typical household’s yearly energy bill in 2020, £17 more than budgeted for.

The Committee is concerned there is a ‘culture of optimism bias’ in the Department, having also highlighted ‘wildly optimistic’ forecasts of demand for Green Deal loans in its report from July last year, Household energy efficiency measures. It urges the Department to foster a culture of openness and transparency around its consumerfunded energy policies and work with HM Treasury to demonstrate that the schemes provide value for money.

• Meanwhile, the National Audit Office (NAO) has, in what could be said to be a considerable understatement, said that BEIS has not achieved value for money for its £100mn spend on the second competition for financial support for carbon capture and storage (CCS). The Department also spent £68mn on the first competition for CCS, which it cancelled in 2011. The report found that the Department’s plan to use a second competition to develop and deploy CCS was ambitious, but ultimately, unsuccessful – no CCS schemes were built. The NAO found that the Department began the competition without agreeing with HM Treasury the amount of financial support available over the lifetime of the projects – this contributed to the Treasury’s decision to withdraw £1bn of funding, leading to its cancellation.