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Energy bills to rise to help Scottish wind farms, report warns

Consumers face higher energy bills under Ofgem changes designed to help encourage wind farms in Scotland, experts have warned.

The planned overhaul of network charges will slash costs for Scottish wind farm developers by £1.3m a year but increase costs for southern power plants.

The reforms are the subject of fierce disagreement in the energy sector. Ofgem claims the changes, supported by some suppliers such as SSE, will save consumers money in the long term.

However a new report, published by consultancy NERA and commissioned by rival supplier RWE npower, warns they will do the opposite and put up bills by £9 a year.

The changes have been under discussion for several years and were due to come into effect in April but have been delayed amid the controversy. The regulator is due to decide next month whether to implement them in 2015.

All power plants pay charges for their connections to the National Grid, but the costs vary with their size and location. Wind farms in remote locations currently face far higher network charges than those close to big cities, to cover the extra costs of connecting them to the grid.

Ofgem says they are charged too much, particularly because they only work intermittently. It said its changes would add £1.60 a year to bills between now and 2020, but that between 2020 and 2030 it could save households £8.30 a year by encouraging power plants to be built in better locations such as where it is windier, increasing wind farm output.

But NERA’s analysis says that between now and 2030 consumers face a total added cost of £3.4bn, or £9 per home.

It finds that the planned reforms offer wind farms unduly high discounts that would not reflect their actual costs to the grid.

“This distortion would tend to cause too much investment in wind generation in Scotland compared to the level that is economically efficient, and thus drive up transmission system costs,” it says.

It also suggests that the higher charges faced by new gas plants sited in England as a result of the changes will ultimately be reflected in higher power prices.

An Ofgem spokesman said it was reviewing evidence and was “committed to thorough examination of relevant information prior to making decisions”.