THE UK Government will not split the UK into different energy pricing zones but instead reform the existing national pricing system.
The Energy Secretary had been considering proposals for zonal pricing that would see different areas of the country pay different rates for their electricity, based on local supply and demand.
But the Government has now decided to retain a single national wholesale price.
Energy Secretary Ed Miliband said: “Building clean power at pace and scale is the only way to get Britain off the rollercoaster of fossil fuel markets and protect families and businesses for good.
“As we embark on this new era of clean electricity, a reformed system of national pricing is the best way to deliver an electricity system that is fairer, more affordable, and more secure, at less risk to vital investment in clean energy than other alternatives.”
Energy business SSE said the move provided “much-needed policy clarity” for investors and consumers.
Martin Pibworth, chief executive designate of SSE, said: “This decision brings welcome clarity and enables us to get on with investing in and delivering critical clean energy infrastructure, in doing so transforming our energy system and supporting the UK Government’s bold ambitions for clean power by 2030.
“Zonal pricing would have added risk at a time when the UK needed to accelerate its clean power transition, making energy bills more expensive. This decision reaffirms the UK as a world-leading renewables market, enabling the efficient delivery of the homegrown energy the country needs.”
Gareth Stace, director-general at UK Steel, said the industry was pleased the Government had heeded warnings and ruled out the “risky” proposal.
“Zonal pricing would have penalised existing industrial sites, driving up electricity prices, further damaging our ability to thrive, foster jobs, and undermining much needed investment in steelmaking.
“Electricity prices for the UK steel sector are among the highest in Europe. UK Steel warned that zonal pricing would have created a ‘postcode lottery’ for industrial power prices, conflicting with the Government’s own ambition to reduce power costs for British industry.
“As the industry transitions fully to electric arc furnace technology, price competitiveness will become even more central to the sector’s future.
“While today’s decision provides clarity on the direction of electricity market reforms, the Government must ensure that the alternative to zonal pricing, reformed national pricing, supports rather than hinders industrial competitiveness.”
Centrica chief executive Chris O’Shea said it was a “common sense decision” and that the “theoretical benefits never stacked up against the real-world risks” in potential zonal pricing.
Claire Coutinho, shadow secretary of state for energy security and net zero, said: “Ed Miliband promised to cut energy bills by £300, but instead as I warned, bills are going up and it’s increasingly obvious that this promise was a fantasy.
“The truth is that wind developers have Ed over a barrel because he set himself impossible wind targets, that means we’ll be paying them billions of pounds extra, roughly £100 on bills by 2030, not to produce energy, but simply to turn off.
“Even Downing Street are waking up to the fact that Ed’s net zero zeal is going to impose huge costs on bills and jobs as we lose businesses to more polluting countries with cheaper energy. That’s bad for households, our economy and emissions.”
