Poor UK energy contracts 'means bills will soar by £1.5bn', says National Audit Office

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Consumers will pay an extra £1.5bn in energy bills over the next fifteen years because of a bungled tweak to government policy, according to a new report by UK public spending watchdog the National Audit Office.

The Department for Business, Energy and Industrial Strategy uses so-called 'contracts for difference' to try and boost investment in low-carbon energy.

The deals fix the price at which suppliers are paid for generating energy, but they leave bill-payers to plug the shortfall if market prices dip.

A report by the National Audit Office found that the way 11 such contracts were drawn up last year means consumers will be left £100m a year worse off over the lifetime of the deals.

The watchdog also said it could not find any evidence that officials at BEIS properly assessed the risk to consumers of its approach.

Public Accounts Committee chair Meg Hillier lambasted the UK Government's handling of the deals.

“The rules BEIS set for the auction of contracts for difference has cost the consumer an extra £1.5bn, and only a small amount of the extra money will be used to generate additional energy capacity," she said.

“Once again the department has neglected to put the interests of service users at the forefront of its thinking.”

The scathing report came as a separate study by MPs on the Environment Audit Committee warned of a "dramatic and worrying collapse" in investment in green projects in the UK.

Investment in clean energy fell by 56 per cent in 2017, the committee found – its lowest level since 2008.

Committee chair Mary Creagh said: “Billions of pounds of investment is needed in clean energy, transport, heating and industry to meet our carbon targets,”

“The Government must urgently plug this policy gap and publish its plan to secure the investment required to meet the UK’s climate change targets.”