New charges on electricity bills will cost local charities thousands annually
A new charge being quietly added to electricity bills in November could cost local charities thousands of pounds annually. Charities and investors are warning this new charge will undermine the government’s net zero ambitions and add extra strain to the charity sector at a time when rising bills are already putting their vital work at risk.
The new levy, known as Nuclear RAB (regulated asset base) levy, will be used to start providing a return to investors in Sizewell C, a new nuclear power station being built over the next 10 years. While the government has agreed that industries using the most electricity will be exempt from the new charges, energy regulator Ofgem confirmed this week that local charities – including youth clubs and community centres – will be forced to pay the full amount.
Social Investment Business (SIB), who provide funding and support to thousands of charities including for energy saving measures, estimate the average charity with a building could see their bills rise by £100-£240 annually, with a significant proportion above this and some facing more than £2500 per year increase as a result of this new levy.
Wellspring Settlement is one charity threatened by huge increases to their bills, with the new levy potentially increasing their annual costs by more than £2500. A local charity with multiple sites, they provide a range of community, health, wellbeing, family and youth services, including hosting a local GP surgery, other local charities and a mental health service in their buildings.
Beth Wilson, CEO of Wellspring Settlement says: "The services we run are vital for our community, supporting people at all stages of life to improve their health, wellbeing, support them through whatever challenges they are facing and raise their aspirations for the future. Adding more charges onto our energy bills will have real-world implications for the services we provide and the people we support. I urge the government to consider the impact this could have and act quickly."
SIB warn that this rise in electricity bills will add even more pressure to charities, who aren’t protected by schemes like the price cap for households, or the full protections available to Energy Intensive Industries (EIIs). They argue the sector is particularly vulnerable to increasing prices due to the low turnovers of volunteer-led clubs and the often-draughty buildings available for community groups.
In April, research found local youth charities are now paying as much as 50% of their entire budget just to cover utilities, putting vital services at risk.
Nick Temple, CEO at Social Investment Business, said: “Adding yet more charges on top of charity electricity bills penalises our most vital community spaces at a time when they are already struggling. It is also in opposition to the government's mission to achieve net zero by making electricity more expensive for consumers just at the time we’re being urged to switch to electric heat pumps to reduce emissions.
“The government must urgently provide an exemption to this new levy for charities, who are particularly vulnerable to rising costs. They should drop this model of adding charges onto electricity all together, which is no longer fit-for-purpose and is slowing down the country’s transition to renewables and inflates everyone’s bills.”
The suggestion to remove levies from electricity bills, instead placing some on gas bills or in general taxation, has long been called for by green groups as a way to incentive the switch to more sustainable heating options like heat pumps. Currently these levies inflate cost of electricity far more than gas, meaning consumers currently don’t benefit from lower bills even if their modern heat pumps are more efficient than a traditional gas boiler.
Spike Island are another charity who face more than £1,000 increase to their annual bill as this levy is introduced. Over the last few years, they have made huge progress to decarbonise their 80,000 sq ft former tea-packing factory, which hosts world-class contemporary art exhibitions and supports over 700 artists, creative professionals and small businesses. Having installed over 200 solar panels and improving insulation they’re worried that rising bills are still putting a real strain on their work.
Kate Ward, Deputy Director at Spike Island, said: “As an active member of the Gallery Climate Coalition, we are committed to environmentally aware practices and have a plan to reduce our carbon footprint by 50% by 2036 and achieve Net Zero in the 2040s. Rising electricity costs will prevent us from switching to low-carbon heating like heat pumps, increase our running costs and put our work with artists at risk. The government needs to rethink how they approach electricity bills to make it viable for more charities and small businesses to make the right decisions for the planet.”
Social Investment Business is urging the government to immediately announce an exemption to the RAB levy for the charity sector, as they have done for EIIs, and to end the practice of inflating the cost of electricity with levies to lower people’s bills and speed up the transition to clean power.
A government spokesperson said: “Thriving small businesses and charities are at the heart of our communities, which is why we have extended business rates relief, supporting economic growth across the country and support for those who need it most. The only way to bring down energy bills for good is with the government’s clean energy superpower mission, which will also secure thousands of good, skilled jobs and billions in investment.”
SIB are urging charities to contact their energy providers. If a charity is on a variable tariff, they will see the charges introduced from 1 November, those on a fixed tariff will need to check with their energy provider.
