Yes, energy bosses like me make mistakes... but green levies are the real enemy By Paul Massara, Chief Executive Of Npower Riposte: npower chief Paul Massara has defended his company from the onslaught of attacks By any measure it has been a stormy week for the energy industry. And I should know - I'm chief executive of one of the so-called "Big Six" energy firms that have been pilloried for raising prices. There has been talk of imposing price freezes, of windfall taxes, rolling back green levies and of a competition investigation. There have been claims and counter-claims by politicians and energy companies. Even the Archbishop of Canterbury has intervened. So it's no wonder customers are confused and upset when all they see is rising energy bills at a time when they are already finding it hard to make ends meet. I want to try to shed some light on the situation. Successive governments have chosen to reduce our CO2 emissions in line with a European directive that was subsequently written into UK law. This means replacing CO2-intensive energy sources, such as coal, with greener sources such as wind, biomass and nuclear power. But these alternatives are 70 to 100 per cent more expensive. On top of this is the fact that the Government wants big energy companies to spend millions of pounds insulating homes, which adds £100 a year to your bill. Then there is the National Grid, which needs upgrading because these new energy sources are both highly variable and in remote places. This adds a further cost. Then, as inflation-busting increases are announced, all within a short space of time, people feel that something is wrong: "The Big Six are ripping us off!" But the reality is that, as an industry, we make less than five per cent on our supply business, which I think is a fair return for the risks we take. And of course we don't fix price increases with our rivals. Repeated competition investigations have concluded that there is no collusion, nor is the market earning excessive returns, and I am confident the inquiry announced by the PM will conclude the same. Yes, there is a tendency to move prices at the same time, but that is because 85 per cent of the bill is made up of factors outside our control (world energy markets, network costs, environmental costs), so when these move, we all have to move to recoup the charges. There is a suspicion, though, that we still make huge profits in the electricity generation market. Prices: npower has raised its bills, alongside British Gas, SSE and Scottish Power In the past five years, however, we have invested more than £5 billion in new, cleaner generation. Due to world commodity markets, these investments are barely covering their interest costs. And my company has come in for special criticism because we paid almost no corporation tax last year. But the Government provides tax relief to encourage companies to make investments. Given that we have invested huge amounts in the UK, it is not surprising that we paid almost no tax. I am proud to work in the energy industry. It is clear we have made mistakes in the past and there are occasions where we have not put the customer first. But I am committed to ensuring we put our customers right at the heart of everything we do, so that our staff have the tools to give the best possible service. So how should we react to the latest changes? The UK needs to spend at least £110 billion on renewing its energy infrastructure and this cost has to be met somehow. If we want to reduce CO2 and deal with climate change, then we all need to accept that this means higher prices. These questions will not be tackled with political posturing such as a price freeze or a windfall tax. Neither of those would solve the problem of customer bills, and both would lead to a reduction in the investment this country so badly needs. We do, however, welcome David Cameron's move to roll back green levies and hold a competition inquiry that will allow a fact-based discussion. So, yes - we understand energy bills are a concern. But in recent days we have seen a lot of hot air and little light. We hope we can now have an open, honest debate about how to move to a reliable, greener energy supply that is also affordable, for all of us.