Ed Miliband planning to increase energy bills for people 'living in the wrong place'

Households face an “unfair” hike in electricity bills under a government plan to change the cost of energy depending on where you live, experts have warned. Energy Secretary Ed Miliband is considering plans to introduce “zonal” pricing, so that energy costs more in areas where demand is highest or there is a shortage of supply. The aim is to encourage major industries to locate plants where energy is available, cutting the need to build new, expensive infrastructure.

But the former Labour leader was warned that ordinary households must be “shielded” from higher bills. Frank Aaskov, director of energy and climate change policy with UK Steel, said: “We are talking about some domestic consumers perhaps needing to be shielded. We are also talking about the fairness of whether consumers down south have to pay higher energy bills compared to up North.”

Andy Manning, from Citizens Advice, said some households might benefit from a regional pricing scheme, but he said: “We have to remember that some consumers who cannot be flexible will need protection and we have to make sure they are not worse off through that. But a cleverly designed, targeted bill support programme, which is necessary anyway, can then hopefully protect those who may lose out.”

They were speaking to a House of Lords Committee, which concluded in a report that regional pricing could ultimately lead to lower bills if done correctly.

The Lords Industry and Regulators Committee said in a report: ”The Government is currently considering reforms to the electricity market. In particular, it is considering a move to zonal pricing, which would see Great Britain’s electricity market split into a series of regional zones with their own prices. A decision on whether to proceed with this reform is imminent.

“We believe that, on balance, zonal pricing should enable better use of existing grid capacity and reduce the amount of grid that needs to be built. This should lower the cost of electricity by encouraging generation and industrial consumers to locate closer to one another, provided that the transition and its risks are managed well.

“However, the Government would need to carefully assess the impacts on generators and major consumers that are unable to move in response to different prices, including whether they should receive transitional support.”

Mr Miliband has said that regional pricing would not mean higher bills for ordinary consumers.

The Lords report also warned the Government that unless it drastically steps up the scale and pace of building more energy generation and network infrastructure, it is in danger of missing its clean power target of decarbonising the electricity system by at least 95% by 2030.

Baroness Taylor of Bolton, chairwoman of the committee, said: “The electricity grid is an essential part of modern life for households, businesses and transport links. Recent outages in Spain, Portugal and Heathrow have shown the devastating disruption that failures can cause.

“Given the scale of changes needed to the planning, regulation and delivery of energy infrastructure, and the UK’s historic record of delivering major infrastructure projects, our report questions the feasibility of meeting the clean power target.

“Time is already running out, and there is no room for complacency. The Government and the sector must ramp up their efforts to have a chance of success.”