Households with gas boilers are being warned they could soon face higher energy costs as the Government looks at new ways to fund the transition to greener heating.
Proposals under discussion would see gas users contribute towards subsidies for heat pumps, raising concerns about who will shoulder the cost of the shift.
The plans come as ministers push to accelerate the move away from gas, despite millions of homes still relying on boilers for heating and hot water.
Under proposals being developed by Energy Secretary Ed Miliband, households with gas boilers could face an additional £30 a year, with the money used to subsidise heat pump installations.
The levy would form part of a £15billion Warm Homes Plan that is expected to be announced early in the new year following negotiations with the Treasury.
Under the current Ofgem price cap, electricity costs around 26.35p per kilowatt-hour compared with just 6.29p for gas, making electric heating far more expensive for most households.
Ministers believe rebalancing these costs would encourage more people to switch away from gas boilers to heat pumps, speeding up Britain’s move away from fossil fuels.
However, the proposals have sparked fierce criticism from senior business figures, including Centrica chief executive Chris O’Shea. He has repeatedly warned that forcing gas boiler households to shoulder higher green levies “would punish the poor.”
In June, Mr O’Shea branded any such move “an abomination.”
Ed Miliband wants to accelerate the move away from gas
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GETTYEven supporters of the Labour government have voiced concerns. Green energy entrepreneur and party donor Dale Vince condemned the policy, arguing it would disproportionately affect those least able to cope with rising bills.
“It impacts the people that can least afford their bills, let alone dream of a heat pump,” Mr Vince told The Times. “If you get a government subsidy for a heat pump, you still need to find £7,000 yourself. [The government thinks] if we start putting up the gas bills of everybody, so that a few people can have heat pumps, we’ll make heat pumps more economic. I just think that’s wrong.”
Officials maintain that any new levy would be balanced by removing existing green charges, meaning overall gas bills would remain unchanged.
However, sceptics point out that promised savings may prove illusory. Chancellor Rachel Reeves recently scrapped the Energy Company Obligation, a £1.3billion annual scheme that was expected to reduce gas bills by roughly £30 per household.
Energy bills for households across England, Wales and Scotland are set to increase on Jan 1, with Ofgem’s price cap rising by 0.2 per cent
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PAMr Miliband’s proposed levy would effectively eliminate that anticipated reduction, leaving consumers no better off than before.
Energy bills for households across England, Wales and Scotland are set to increase on Jan 1, with Ofgem’s price cap rising by 0.2 per cent. This translates to approximately 28p extra per month for those on standard variable tariffs, bringing average annual bills to £1,758.
Analysts at Cornwall Insight anticipate a more positive outlook for April, forecasting an 8 per cent drop to around £1,620 annually following Budget measures.
The scale of the challenge facing ministers is considerable. More than 23 million British homes currently depend on gas boilers for heating and hot water.
Meanwhile, heat pump adoption remains sluggish, with fewer than 100,000 units installed throughout 2024 compared to approximately 1.5 million gas boilers.
Britain reportedly has the slowest heat pump rollout in Europe, with just one in eight new properties fitted with the technology.
The Department for Energy Security and Net Zero has dismissed the reports, with a spokesperson stating: “This is speculation. We are investing an additional £1.5billion into our warm homes plan, taking it to nearly £15billion – the biggest ever public investment to upgrade homes and tackle fuel poverty ever.”