Energy costs more in north than any other region of UK
MP demands review of ‘crippling’ pricing structure Bills: Subsidy helps to cut costs
People in the north are paying between four and six pence a unit more for electricity than the rest of the country.
In the most extreme examples, prices can be more than 21p per unit whereas in parts of England and the central belt average unit prices are as low as 14p.
The disparity was revealed by Inverness MP Drew Hendry who is demanding a review by Ofgem. But the industry regulator says it is for the government to rewrite the rules on fuel charges.
Mr Hendry, who sits on Parliament’s energy and industrial strategy committee, says the high prices paid by people in Grampian, the Highlands and islands and Moray is crippling households.
He said: “The evidence we have been told of in our committee is something people in the Highlands and islands have suspected for a long time.
“We are paying more: four to six pence more, for every single unit we use. And more than anywhere else in the UK.
“The inequality is even more galling as we are producing vast amounts of the electricity through the wind farms and hydro production in the area.
“Basically I have now asked the committee to look into the matter with urgency. There isn’t an inquiry at the moment but we need to pursue Ofgem as the regulator to hold an inquiry and make a decision.
“In Aviemore we have had an energy advice surgery and some people are now saving hundreds and thousands of pounds – it can’t be right that access to information, and cheaper prices, is only if you know about it.”
Backing Mr Hendry is energy provider Scottish and Southern Electric (SSE). A spokesperson said: “Regional pricing variations are based on the different costs to distribute energy to more remote areas.
“Higher network charges affect not only the north of Scotland but also north Wales and Merseyside.
“SSE Energy Services supports replacing the current regional set-up with one national charge across Great Britain and has previously made the case for national pricing.
An Ofgem spokesperson said: “Network companies face different costs for serving customers in GB regions, for both gas and electricity.
“Licensed network operators recover their allowed revenues, set by Ofgem under the price control arrangements, from customers located within their licensed areas (in many cases via suppliers).
“This is a reasonable way to allocate these costs between customers.
“Ultimately it would be for government to decide if changes should be made. Typical network costs are around 25% (about £250) of overall energy bills.”
A Government spokesman said it is for Mr Hendry’s energy committee to recommend change, and their proposal would then make its way through Parliament. Regulator Ofgem has a statutory role in protecting vulnerable consumers.
It has a particular role to play in regions across the UK where there is a higher risk of fuel poverty, such as the Highlands.
Ofgem said the north of Scotland network operator receives a cross-subsidy through the Hydro Benefit Replacement Scheme, so customers face lower network charges than they otherwise would.
This subsidy is not met directly from the hydro operators but is recovered from suppliers across Britain through a charge added to all units of electricity.
The cross-subsidy is around £41 per year per household in north Scotland.
For non-gas households, the Fuel Poverty Network Extension Scheme offers funding towards the cost of connecting to the gas network.
Between 2016 and 2021 gas distribution companies will have to deliver 18% more of these connections across the country.