No to Gas Meter Tax
Government plans for a Gas Meter Tax to pay for low carbon heating will shift costs onto lower income households, warns the Gas Users Organisation. Any subsidies for biomethane gas should be funded from general taxation not by a levy on household gas bills.
The Department for Business, Energy and Industrial Strategy (BEIS) is consulting over a proposed new Gas Meter Tax, that will levy gas suppliers with the expectation that the costs will be passed on to customers.
This is not in the interests of the 24 million households who use gas for their domestic heating.
This is particularly concerning in the early phase where a flat charge per connected gas meter is proposed, so that a one bedroom flat will be charged the same rate as a ceramics factory.
The Gas Meter Tax is proposed to subsidise the injection of so-called “biomethane” into the gas grid, which is chemically the same as Natural Gas but made from renewable sources.
Green gas is a really good idea, so that gas customers can keep their gas supplies, and the gas grid in the future will carry zero-carbon gas. But there are technical issues with the current way that biomethane is made, which means that it can only make a relatively small contribution. The heavy lifting for green gas will come from a future transition to hydrogen.
BEIS claims that the Gas Meter Tax will be only £6.90 per consumer per year. However, this is the thin end of the wedge, paying for what is currently only a very marginal contribution to UK gas demand. 10 MWh worth of low carbon gas from biomethane is fed into the gas grid. Compared to 2019 domestic gas demand of 309 000 000 MWh . As the green gas sector grows then costs will grow as well, and consumers need protection from those rising costs.
The danger of the government’s approach is that it establishes a principal of the consumer paying a gas meter tax for what will at first only be used for a relatively minor contributing strand towards decarbonisation.
Once established, the same tax will then be employed to fund the much larger infrastructure projects required for a shift to hydrogen in the future. A Gas Meter Tax hits hardest at those who can least afford to pay. Many people with limited incomes have hard to heat homes, that are poorly insulated, and higher fuel bills will force people to choose between heating and eating.
Already we see this in the operation of subsidies to fund renewable electricity sources, which are paid for by a levy on household energy bills. The OBR calculate by 2022 the green levy to pay for renewables will cost £10 per week per household on household energy bills regardless of income and ability to pay.
A much better approach is for the cost of zero-carbon energy to be paid for through general taxation, which is linked to ability to pay