Question

To ask the Secretary of State for Energy and Climate Change, if she will take steps to merge the 14 regional markets for energy distribution to create a national energy market for electricity distribution and reduce the price paid by consumers and businesses in the Highlands and Islands.

Electricity distribution network charges vary by region and reflect the costs of running the network in that area and the number of consumers that those costs are spread over. Moving away from this ‘cost-reflective’ approach would weaken the local accountability of the network operator in ensuring expenditure is fully justified, in turn weakening downward pressures on network costs overall. In addition, a national price for electricity distribution would mean lower network charges in some areas, but increases in others. There are fuel poor consumers throughout GB, including in the areas that could be expected to see higher bills as a result of such a change.

Any decision on whether to pursue this further could therefore only sensibly be considered on the basis of robust and evidence-based analysis. Ofgem is currently working to inform the issue, and the Government will consider its analysis carefully. It will also be important to take full account of the final conclusions of the energy market investigation which is currently being undertaken by the Competition and Markets Authority. Its provisional findings favour more locational transmission pricing.

To help protect domestic and business consumers in the North of Scotland specifically, Government has already introduced the Hydro Benefit Replacement Scheme. It provides an annual assistance amount of over £50m to consumers in the North of Scotland. The cost of providing this discount is recovered from consumers across the whole of Great Britain.