Political reporter
Energy secretary Ed Miliband is “considering” plans to introduce regional pricing for power that could lead to lower bills in parts of the country that generate more energy.
He did not set out details of the “zonal pricing” scheme, which is meant to make the national energy grid more efficient and encourage investment.
But he rejected claims in a Daily Telegraph article that it would mean increased energy bills for southern English households.
Some energy companies have backed the idea – but others say it will scare off investment and lead to higher bills.
According to the Telegraph government officials have advised Miliband to back plans for a form of regional pricing used in some other parts of the world including Australia, Italy and Sweden.
If implemented, it would be the biggest reform of the power market since the 1990s privatisation.
Under the scheme, power costs would match local supply and demand. In practice it could lead to lower bills in areas with abundant wind generation like Scotland rather than households in the South.
The scheme is supported by some energy businesses – including Greg Jackson, the boss of Octopus Energy, the UK’s largest domestic energy supplier.
Mr Jackson said it could make the overall system more efficient and reduce the amount of network upgrades needed to shift the electricity from where it’s generated to where it’s consumed.
But Dale Vince, the founder of green energy company Ecotricity and a Labour donor, said on BBC Radio 4’s Today Programme that zonal pricing was a “terrible idea” as “tens of millions of Britons could end up paying more for their energy than they do now”.
Speaking ahead of an international energy security summit in London, Miliband said the government were considering options to change energy pricing but insisted “absolutely no decision has been made”.
“This is an incredibly complex question that we are looking at about how we reform our energy market,” he told BBC Radio 4’s Today programme.
“There are two options, zonal pricing and reformed national pricing.
“Whatever route we go down my bottom line is bills have got to fall, and they should fall throughout the country.
“We are going to take our time over this very complex and important decision.”
The Liberal Democrats have rejected the proposals saying the “government has got to ensure that reforms to electricity pricing ultimately bring down customers’ bills and create a fairer system – across the board.”
The party’s energy and net zero spokesperson, Pippa Heylings, said: “In a cost-of-living crisis and when energy giants have been raking it in – energy bills should be going down not up.”
Reform UK leader Nigel Farage called the plans “a form of bribery”, saying cheaper bills would be a payoff for massive infrastructure projects “ruining” the local area.
“None of this I think has been fully thought through,” he argued.
“I think Ed Miliband has a religious fervour for achieving that zero, regardless of the consequences.”
The Green Party of England and Wales have also called on the government to reject regional pricing.
Party co-leader Adrian Ramsay told the BBC: “People live in poverty all over the country – penalising families struggling to pay their bills because of where they happen to live would be wrong.”
The Conservatives have also been approached for comment.
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