Energy firms will be allowed to triple the amount of money they add to customers' bills to pay for renewable power, nuclear and other environmental measures, under plans to be announced by the government next week.
The deal over a new energy bill, struck after weeks of sometimes bitter negotiations between the coalition partners, will mean the total amount energy suppliers can add to domestic and business bills will rise from ￡2.35bn this year to nearly ￡10bn at the end of this decade. Adjusting for inflation that would be worth ￡7.6bn in today's prices, an increase of nearly three times.
Based on government estimates that green measures make up ￡20 of the average domestic gas and electricity bill of ￡1,249 a year, the cost of increasing the cash set aside to pay for renewable investment would rise to about ￡80, or ￡60 adjusted for inflation. However, officials argue that by the end of the decade the benefits of energy-saving measures and less reliance on expensive fossil fuel power will mean bills are actually lower than they would be without the green policies.
The extra charges on bills reflect the cost of policies that successive governments have imposed on energy suppliers, such as paying above-market prices for renewable energy to support these new industries and paying homes and businesses who fit wind turbines, solar panels and other small-scale green electricity generators for the energy they supply back to the grid.
Government sources said the bill would end months of complaints by businesses that the row between the Lib Dem-controlled energy department and the Treasury was turning away investors, who said they needed more certainty before committing money to building renewable, gas and nuclear power plants in the UK.
When the bill is published ministers will claim that it will unleash ￡110bn of spending on generation and renewing the National Grid by the end of the decade, and generate a further 250,000 jobs by 2030. But the increase in sums added to bills for green measures is likely to anger consumer campaigners and many Conservative MPs who say customers cannot afford to pay for expensive renewable and energy-saving policies at a time when underlying bills are being driven up by the price of coal, gas and oil.
That concern will be increased by continuing uncertainty over the true cost to consumers and businesses after government officials admitted that some of the government policies which had previously been included in the cap on the amount added to bills for green measures have been left out. Among the schemes excluded from the cap are energy efficiency and measures to reduce fuel poverty. Officials said a full assessment of the cost for bill-payers would be published soon, possibly as early as next week.