This week the price comparison website uSwitch published new research revealing the extent to which customers are still confused by their energy bills. This shows plainly that for all the recent efforts by energy suppliers (ourselves included) to simplify bills, we haven’t gone nearly far enough.
Don't get me wrong, there are clear reasons for the morass of information on bills and virtually all of it is there because the regulator requires it to be. But a recent study we carried out with YouGov found that two thirds of people wanted simpler information on their energy bills. (How many times have you bothered to read the calorific conversion table on your bill which shows how your supplier has converted therms of gas into kilowatt hours?) There is always going to be a trade off, but we need to listen to what customers are telling us and take action.
Because if customers don't understand their bills, they can't understand where the costs are coming from, what they're paying for and why. And given the scale of the investment challenge that lies ahead and how that challenge is going to be paid for, that's a recipe for disaster.
A case in point: last week, the European Commission gave the go-ahead for EDF's Hinkley Point C nuclear power plant to receive legal subsidy, paid for through the bills of UK energy customers. This power station is a major moment for the Government's energy policy and could power millions of homes. It is not cheap, however, and by some estimates could add around 3% to bills when it starts to produce electricity in the mid- 2020s. It hasn't been dubbed the "world's most expensive power station" for nothing.
I have nothing against nuclear power, indeed other technologies such as carbon capture and storage and renewables will require subsidy. Britain needs low-carbon sources of energy in order to decarbonise its electricity generation to meet targets and the challenge of climate change. However, my concern is that we can't keep piling costs onto consumers at a time of rising energy prices: it is simply unfair. What's more, although it may deliver long term cost-reductions, the costs of some government policies for clean technologies and energy efficiency measures will increase considerably in the coming years and Parliamentary legislation means that all will be funded by consumers through their energy bills.
Yet consumer awareness of this is low. We commissioned consumer polling last month with YouGov which found that four in ten customers have no idea that they are paying for government energy policies through bills. We've a mix of rising costs and low consumer awareness: we're storing up problems for the future.
This is not a problem that energy companies can deal with alone. As Margaret Hodge MP, Chair of the Committee of Public Accounts, recently said: "No one in Government is taking responsibility for assessing the overall impact of this investment on consumer bills and whether consumers will be able to afford to pay."
So what needs to be done? First we need to be clear with consumers about what this means for their energy bills. At SSE we took the decision last year to make this case to our consumers. We said that Government, of whatever Party, should take action to take some of the rising policy costs off energy bills. They listened and we were subsequently able to reduce our prices by around £50 for every customers and take the unprecedented step of freezing prices to 2016. But if we want prices lower for longer, something more needs to be done to the cost base.
To achieve this we have to address fundamentally how these policies are paid for. At its heart this is an issue of fairness: unlike taxation customer bills are not means-tested, so this is a regressive way to collect policy costs where the worst off pay proportionately more. We need political change to protect vulnerable consumers and funding these policies through taxation is the best way to do this. It would also be more transparent.
With more projects like Hinkley expected to come through, we have to address this issue. Energy companies have a critical role to play, but using them as a collection agent for many imposed policy costs is not fair on customers, particularly if many do not know it is happening and cannot afford to pay.