What's Fuelling Your Energy Bill? Panorama

With energy bills biting harder than ever, is the Government's

great energy gamble working? you're spending 10% of your

disposable income and someone slaps on another 20% price increase, what

do you do? You can't invent the money. What fate awaits the

increasing number of people already struggling to keep the cold at bay?

I'm really scared about this coming winter. Because, if it is really

cold, what do we do? Do we put the heating on and not eat properly?

Ministers blame forces beyond their control profit hungry companies and

world gas prices. So why is the government so hooked on these when

they cost so much money? And we uncover the strange tale of how

Tony Blair saddled us with a very hefty bill. Perhaps he saw it as an

important big gesture, but maybe lost track of the details such as

the tens of billions of pounds that this was going to cost the UK

consumers. Tonight - what's really fuelling your bill policy or

We are power hungry, day and night we depend on energy to feed our

economy and run our homes. But the bill for that vital spark is higher

than ever, on average �1,345 per So is this price hike a painful

blip or the start of an agonizing trend? To answer we'll need to

reach behind the switch to understand the mechanics of the

energy business and how politicians But first, it's getting chilly in

Paula McCrudden lights the fire as usual, but it brings her little

comfort. But just give me a feeling a few years back, how much did you

worry about energy bills? I didn't. I honestly didn't give it a second

thought. The bill used to come, pay it. Not a problem, you know. Those

days have gone forever. It's a fear that you're going to get into

trouble. You either have your heating on, and cut way back on the

food, which we've already cut back on, or you don't have the heating

on, and have a little bit extra for food. Paula is officially in fuel

poverty, as more than 10% of her income is spent on fuel. She's one

of over 6 million households in the same predicament the number rising

daily. I mean what I do is, if I can cook two things in the oven,

say today's dinner say it's a pie or something, and a stew, put them

in at the same time so I don't have to put the oven on again tomorrow.

You have to think of all sorts of ways to, you know, just to sort of

cut back. Paula tries hard to reduce her bills. Monitoring her

electricity usage online, she's shopped around for the best deals

and even made her home energy efficient. But still, things have

got so bad she's even changing her winter wardrobe. So what have we

got here? This is my winter wear. This is my little furry boots that

I wear round the house to keep me warm. What I call my snugly, which

you sort of put on. And it leaves your arms free, it wraps around you

basically. It's quite warm. Not the highest of fashion! No, no, not

really. But essential in your view? Yes, yeah, I'd rather look silly

than get cold, yeah. Yeah. While we may shiver, parts of the

economy quake in fear at high energy prices. This is Steelite,

one of the few surviving potteries in Stoke. They make robust crockery

for hotels and cruise liners, most of them abroad. Well the major

consumer of energy is kilns. Obviously you need to fire the

kilns at high temperatures in order to form them into the vast array

that you can see around here. closely do you keep an eye on the

cost of energy? This business checks our energy prices every

single morning without fail. Because it's so important. It's a

huge cost to the company. It's over �2.5 million. We need to keep a

very close eye on it. But their success in creating both exports

and jobs could be shattered by the fuel bill. This industry, this city,

has lost lots of companies over the years. They continue to go. And

unless the conditions are right, that will continue to happen.

government appears keen to deflect anger over price rises towards

energy companies. It's simply not fair that big energy companies can

push their prices up for the vast majority of their consumers. We are

making them be competitive. They're permanently being watched to make

sure it is a competitive market. But their policy actions commit us

to a hefty price tag - a massive switchover to homegrown low carbon

energy, more protected from global fuel price swings. But it's a

gamble playing with new technology, international markets and our home

energy habits. One thing is for certain. Up front it's perilously

expensive. And it's racking up our bills. At stake is �200 billion

over our money, which will be spent to revolutionise the way we power

our lives. Primarily, less dirty coal and more clean wind. If we

spin forward to 2020, the government wants electricity from

renewables to jump from seven-30% of output. But here is the problem.

The traditional power generators, which are being cut back, are cheap,

costing �78 per megawatt hour to feed into the grid, whereas

electricity from new sources like offshore wind cost �170, more than

double that amount. Who will have to find the money? We will. Much of

it spent around the coast on hardware at sea on jobs on the land,

so I went to Grimsby with Sarjit Sambi from Centrica, the UK's

biggest energy generator. Offshore generation has two big advantages -

the wind blows stronger, and local objections are weaker because

nobody lives there. Centrica has these two wind farms off the

Lincolnshire coast and they are not small. Two wind farms combined

cover an area of around 50 square, kilometres. A each turbines is

about 130 metres from sea-level to the top. To put that into

perspective, the London Eye is about 120 metres so they would

overshadow that somewhat. Offshore wind is pretty unique in the

renewables family in the UK. It is a technology where you can see how

you can venture near the cost down over time. It takes advantage of

our very significant skills and capabilities in terms of Offshore

Engineering, and we also have a great natural resource around the

UK are ales that we can develop. Britain leads the world in offshore

wind. Building turbines is pricey, wind is free, but there is still

maintenance. It is eye-watering the expensive, and against government

forecasts that those costs will fall, the cost of offshore wind

keeps going up. A even the former government chief scientific adviser

has concerns. Offshore wind is extraordinarily expensive and I

would say we need to move cautiously down that route. There

are days in the winter across the British Isles when there is

effectively no wind to drive the turbines, so they always have to be

duplicated by gas-fired turbines which can be switched on and off to

cover these days of stillness. Alongside existing turbines here,

you can see some new Stubbs growing out of the sea and that is where

the new blades will be. To give an idea of the government's ambition,

they will need four new feels like this each year for 10 years to hit

their target. To make this happen, they need the energy companies.

Before, we had a very simple concept of producing energy at the

lowest cost. Today, we have multiple objectives. We need to

maintain security of supply, we need to reduce carbon emissions.

Ultimately, the �200 billion of investment will feed through to

consumer bills. But could the energy industry pay more? The

regulator Ofgem recently reported rising profit margins across the

sector. Centrica made nearly �1.3 billion in the first half of this

year. On top of that the Energy Secretary has accused the big six

generators of predatory pricing. What do you make of Chris Huhne's

accusations of predatory pricing? That is something which can't be

substantiated. We don't do it. Since 2001, 17 inquiries all giving

the UK energy industry a clean bill of health. The government knows

wind technology will stall unless energy companies can make good

money, so Chris Huhne has a difficult balancing act. Talking

tough for the public, but tender for the boardroom. I will be on the

side of the consumer, making sure there is no excess profit in there.

They are not the Salvation Army, they obviously have to make a

respectable return in a free market. So, where might bills be in the

next few years? Chris Huhne would get long odds on his department's

prediction that fuel payments could drop by the end of the decade. In

fact, they are on their Rome. Predictions are fogged by unknowns,

but the most recent forecast says your combined gas and electricity

bill in 2020 will be �1,239, �100 lower than today. Citigroup thinks

that total could be up to 50% higher, reaching �2,000. Research

by a uSwitch.com suggests we will be paying an average of �3,202 by

2020, nearly tripling your current bill. Whatever the precise level of

your future bills, one reason for there acceleration skyward is

fairly straightforward. Sadly greener energy is not cheap energy

and we are paying for the scientist' demands and the

politicians'' promises on climate change. One promise in particular

lies behind the Windrush, which some believed was a multi-million

pound gaffe. It was taken in 2007 by Tony Blair in Brussels, three

months before he stood down. This was the decision made at a meeting

of the heads of state of the European Union in Brussels. Tony

Blair was a very keen advocate of action for climate change. On the

table was Britain's commitment to renewable power by 2020. A senior

civil servant we have spoken to says Tony Blair was advised that

15% of renewable electricity was the maximum we could manage, but he

emerged having signed a radically different promise, virtually

tripling the challenge by agreeing to 15% of all energy being

renewable. Now including heating for homes and factories, fuel for

vehicles on top of electricity. In short, everything that used his

power. The expectation before we went into the meeting that day was

that we would be aiming for 15% not on energy but on electricity on the

grid. My role in the Treasury was to try to bear down on the cost of

energy policies, both for the taxpayer and consumer. Suddenly the

game seemed to change. For lino is there was a meeting that carried on

until 3 o'clock in the morning, very tired people in the meeting,

and perhaps there was an argument about whether we should be

electricity on the grid or total electricity. When the official we

have spoken to heard Tony Blair had committed to the higher energy

Perhaps he saw it as an important big gesture, but maybe lost track

of the details such as the tens of billions of pounds that this was

going to cost the UK consumers. you think it's possible that this

was you would actually a gaffe? could be. It could have been? But

was it a bad gaffe? At the time for me it was a surprise. Was it a good

target? It may well have been a good target. Tony Blair's office

told us it wasn't a gaffe, but a decision to protect the environment

and help energy security. Mistake or master stroke, it's now part of

a pricy target. Our estimate of how much needs to be spent to hit the

target is about �25 billion a year. That is one and a third Crossrails

a year, two-and-a-half Olympic Games a year, 2.5 times the budget

of NASA. In fact, we could say goodbye to wind mills and launch

our own Mars mission if we wanted to for the same amount of money.

Back on earth, here's what passes for Mission Control - in the quest

to rewire Britain. Well, the information on this screen is

becoming increasingly important. It shows the weather and particularly

the wind speed across the country. However, it's generated, National

Grid's job is to make sure there's always power behind the switch. And

this is the second big element fuelling your rising electricity

bill - �17 billion to wire up the changing network. Alan Smart from

National Grid is paid to make sure our tellies, torst and kettles keep

running. For a conventional generator, you know when it's going

to start generating. You know how quickly it's going to increase its

output. With wind, it's when the wind arrives, and it's when the

wind changes, and it's when the wind goes away. And there's another

problem with new forms of power - geography. Traditionally, the power

stations have been in the centre of the country. New power stations,

new nuclear power stations around the coast, wind farms offshore -

all of that power is coming at the edge of the power system. We've got

to transport that power reliably to the centres of demand. That means

more of these - the National Grid is planning 214 miles of pylons

spread through many parts of the country from Suffolk to Cumbria.

Down in the Somerset levels, the steel giants will stride through an

area of outstanding natural beauty. The new nuclear reactor at Hinkley

Point is pointless without connection to the grid.

And this consequence of our energy revolution is not only expensive,

but ugly, triggering a fierce back lack. You care about the

environment. You care about the countryside, and you care about the

next generation, but we don't want to leave them a landscape that is

spoiled by pylons. APPLAUSE

These protesters, like many communities, facing new pylon runs,

want the cables underground. In the end, this sounds like a

classic "You don't want this in your view." It couldn't be more not

in my backyard. No, this is a totally national issue. This is

coming across the whole of the country. What we want to do is what

is right in the 21st century. And by right you mean invisible, in

effect, don't you? Yeah, put them out of sight. We do that in our

water mains and our gas mains, why not with electricity? National Grid

describe their position on burying the cables as neutral, and they're

still consulting with the local community, but they want people to

be aware that undergrounding will cost us all. For this power line

through Somerset, to underground in its entirety, would cost around a

pound for every domestic consumer's bill for the next 40 years. You're

talking about �100 million as opposed to a billion underground,

billions - a lot of money. So now we have two steps to higher bills,

pricy green energy, costly cables and here's a third. A quarter of

our power stations are not old, they need replacing, including the

nuclear plant at Hinckley point. How far beneath my feet is the

actual hot stuff? We're about ten to 15 metres beneath here, so

that's where the nuclear reaction is taking place. It's a strange mix

of the high-tech and quite old, isn't it? You look around and see

the telephones and things that look like they're from a period drama.

But over the last 35 years, the important nuclear safety relate

equipment has been constantly refurbished. Nuclear power carries

a set of unique risks. It carries an extraordinarily high tion risk,

a high safety risk as we've just witnessed in Fukishima, so if you

have an accident due to an earthquake and tsunami in Japan,

and in Germany, they decided to instantly close a whole set of

nuclear power stations. That means it's very difficult to price that

risk, and therefore very difficult for investers to get involved.

despite these high potential costs and existing controversy, nuclear

power is gaining support even from the green wing - if grudgingly.

don't actually like nuclear power, and I would much rather we didn't

have to have nuclear power. But the problem is that I like the

alternatives even less, and it's become clear to me that as much as

I dislike nuclear power, if we don't replace our nuclear power

stations, we'll have no option but to invest in more fossil fuel.

Government is proposing a guaranteed price for nuclear. It's

a sweetener to encourage building, so they meet their carbon-cutting

targets. We'll pay for the sugar, but do we know that? The Government

can't be passive about any of this. If it's going to invest heavily in

new wind, it's going to have to make the case for it. If it's going

to invest heavily in nuclear, it's going to have to make the political

case for it. It can't pretend that it can just drift along and expect

people to accept stuff when they're not being told why it's a good idea

to accept it. So is Government in denial about their heavy burden on

their policies will put on consumers? You are reducing the

production of the cheaper sources of electricity and Government

policy is going to increase production from the more expensive.

That's a fact, isn't it? It's not. Well, it is a fact. The figures are

in your report. It's not a fact because the key point is it's not

just now that we have to worry about. When you make investments in

energy, you're making invest in thes for ten, for 20, for 30 years.

What I can say and give the assurance is at any given point the

total effect of Government's policy including the energy savings

reduction is going to be able to make sure bills are lower than they

otherwise would be. That's a promise? Overall it's an assurance

that we can, we can. So on that vexed issue of future energy bills,

let's look at what we've been dealt. Three of a kind - the high cost of

low carbon, expensive story station renewal and pricy pylon runs to

hook them up. But Chris Huhne says it's also dealing with trump cards

- first those energy saving policies to help us cut the bill.

And second, protection from soaring global energy prices. But is it

really going to make energy affordable? There's room for most

homes to save energy and money, but enough to offset price hikes? This

is the Boaty family from St Albans. I have started to become the grumpy

old man. I go around turning the lights off and everything and

having a goo at the children for leaving things on and sort of

coming back and saying, you know, the house is lit up like... A

Christmas tree. In fact, Paul's become so switched-on about

minimising his heating bill, he's taken fuelling the house into his

own hands. We take? Dog for a walk in the woods. We pick up suitable

pieces of wood lying down, bring it back, and we use it to burn in the

winter. This would be a nice piece to have. It saves money. It's free.

It's lying in the woods. Yeah, it's just here lying around. At home

alongside the woodpile, they have to lagged the loft, double glazed

and dwell in the sofa sleeping bags but even that's not enough. How are

you finding paying your bill, your energy bills? I think we're finding

it is becoming increasingly a struggle, a concern. I think the

days of cheap energy are over, and the sooner everybody realises that,

and we start planning for it, the better. Stealing ashore under the

cover of darkness is the other threat Chris Huhne is pledging to

fight - pricy foreign gas. He says we'll need less if we grow our own

green power. One challenge is to get us in a

position where we're less vulnerable to the sort of big price

increases for oil and gas that we've seen over the last year. If

we can get to a situation where we're using less energy and the

energy that we are using is coming from renewable and nuclear sources

rather than just from fossil fuels, then we're going to be less

vulnerable to that sort of buffeting.

On this tanker is liquefied natural gas from Qatar. Now the ship is

safely docked, they can begin piping off the gas, which at this

stage is still a super-cooled liquid actually flowing through

these pipes. It will take about 24 hours to discharge the whole vessel

before the gas flows off down those pipes, and there's enough in here

to heat nearly five million homes for a week. But could Chris Huhne's

foe turn out to be more friendly in the future? There are good reasons

to think that the gas and even perhaps the oil price may well fall.

That's good news for customers, but if we're pushing out of those areas,

particularly out of gas, into a crash course on wind, given the

cost of that wind, the bills are going to go up a lot. But wouldn't

dashing back into gas mean abandoning our climate change

goals? Not according to accountancy firm KPMG, who explained in a

report out this week that by moving rapidly from coal to gas and

growing wind more slowly, we could hit our carbon targets that save

the public �34 billion, saving the world for less. We need to get into

a position where we can look consumers in the eye and say we

have spent the least amount of money possible to give you power

whilst still doing the things we need to do for the benefit of all

around carbon and around renewables targets, and I think our research

would indicate that there is a gap there, that we could spend less

money. Therefore, I'm not sure we could look the consumers in the eye

right now and honestly say we're spending the least amounts we need

to possible. But the man orchestrating the

gamble isn't blinking. Government policy overall taking the low

carbon and energy-saving policy will have a lowering effect on

bills. Our bills may go up because of world market prices, because of

the need for investment and all the rest of it, but the overall effect

of Government policy would be to lower bills compared with what

would happen otherwise. In my view, the Government are storing up

tremendous problems for themselves unless they are entirely open,

entirely honest with consumers about what this is costing today

and what it will be costing in five, ten and 20 years' time cos it seems

to me that the consumers will not pay these higher bills unless they

fully understand what's being spent, why it's being spent.

Government's next chance to be straight with bill payers like

Paula McCrudden and the boaty family comes this month in the

energy statement which includes a forecast of future bills. How do

the policymakers think that in sitting around in a house where

you're spending 10% of your income on gas and electricity to heat your

house that you're going to be ablepy with another X per cent on