Energy bills are set to go up after regulator Ofgem said it would go ahead with plans to shake up the energy market that will end up helping Scottish wind farms at the expense of power stations in England.
A consultation on the scheme ends later this month, but the regulator has said it is likely to introduce the changes, which could see prices go up by as much as £20 a year on average according to critics in the industry.
Average household dual-fuel energy bills are currently more than £1,300 a year.
Known as Project Transmit, the scheme aims to alter the charges energy companies pay to use the National Grid, to encourage low-carbon and renewable energy producers. It aims to narrow the difference between the costs of power generation between the North and South.
The new charges are due to come in next April and Ofgem has admitted that its proposals will result in Scottish wind farms paying an average of £13 per kilowatt less than at present to access the National Grid, while those in England’s South West might pay £5 per kilowatt more.
The Mail on Sunday revealed last year that a report from respected economic consultancy Nera, commissioned by npower, one of the Big Six providers that dominate the UK retail energy market, claimed the changes ‘would materially increase consumers’ bills by a total of around £6 billion’ by 2030.
As a result, Ofgem delayed making the planned changes for a year while it considered Nera’s evidence.
It also commissioned a further report itself into the scheme. That report has now been published and it shows that prices to consumers could indeed rise as a result of the changes, though by less than the £6 billion Nera estimated. Nevertheless, Ofgem admits that the changes could mean up to £1 billion in extra costs by 2030.
‘We consider our position, that we are minded to change the transmission charging methodology, best reflects the costs that different generators have on the system and is in the best interests of existing and future consumers,’ said a spokesman for Ofgem.
The watchdog has been criticised by power firms for apparently creating Government policy rather than enacting it and favouring Scotland ahead of the referendum on independence later this year – a charge Ofgem denies.
‘This is essentially both a hidden subsidy to renewables and a subsidy from English and Welsh energy customers to help pay for Scottish energy infrastructure,’ said an energy industry source.
The changes are intended to ensure that the Government hits its legally binding target of halving carbon emissions by 2025 based on 1990 levels.
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