SCOTTISH billpayers “subsidise” those in London, according to a financial analyst.
Households in Scotland are paying higher energy bills than they ought to keep prices down south of the Border, according to experts at the Fuller Treacy Money investment strategy firm.
In a newsletter arguing against zonal pricing, the firm’s owner Eoin Treacy says it is better for Scots to pay over the odds than those living in the English capital.
Zonal pricing, which has been considered by the UK Government in the past, would see places like Scotland – where lots of energy is produced but there is lower demand – pay cheaper bills, while London would pay more than they currently do.
Treacy said: “At present, Scottish consumers subsidise London. If the Government creates localised pricing that will mean London subsidises Scotland.
“Considering the relative population weightings the answer is to leave the system unchanged. However, that would not incentivise net zero ambitions the Government has tied themselves to.”
London’s population at the last census stood at around 8.9 million while Scotland’s stands at around 5.5m.
In a consultation on the UK energy market published during Rishi Sunak’s premiership, the Government noted that zonal pricing was in place in some European countries such as Italy, Norway, Denmark and Sweden.
The consultation said: “The evidence we have collected suggests there is a clear case for continuing to assess locational pricing, specifically in the form of zonal pricing, due to the potential system operation and consumer savings it could offer.”
It is understood the new Labour Government has no stance as yet on whether to introduce zonal pricing.
Others, most notably the industry body Renewable UK, have argued against zonal pricing.
Earlier this year; Renewable UK said that while zonal pricing could bring benefits including incentivising "new electricity generators, such as onshore wind farms, to develop sites closer to high demand zones like London" it should not be pursued as a means to decarbonise the energy sector.
It added: "The industry consensus is that the risks of overhauling the system in such a radical manner would vastly outweigh any potential benefits. A move to zonal pricing would significantly increase the costs of financing projects across all technologies, due to the extreme price volatility it brings and the greater potential risk for investors as a result."
The Scottish Greens said it was time to "reject the idea that this is about Scotland 'subsidising' or 'being subsidised'".
Party co-leader Patrick Harvie said: "Our green energy future will involve more cooperation between countries, across the UK and further afield. That will still be true for an independent Scotland, but we’d gain the power to regulate the big gas and electricity corporations to stop them prioritising profits over people.
“The UK Government must also stop handouts and tax breaks to these corporations and must also break the links between gas and electricity to cut bills and allow for warmer homes run on cheap, abundant, renewable energy and a fairer system.”
Kenny MacAskill said: "Privatisation and fragmentation have rendered the entire UK energy system dysfunctional.
"But what's clear is that Scotland is energy rich, yet half of Scots are in fuel poverty. It’s perverse that turbines turn on land and sea, yet folk cant heat their homes.
"First it was oil and gas and now its renewables. It's about time that Scotland and Scots benefitted from their resource. If that means zonal pricing then so be it, it's what we're due.”
A UK Government spokesperson said: "In an unstable world, the only way to guarantee our energy security and protect consumers from future energy price shocks is by moving towards homegrown power.
“We are reviewing responses to the consultation on reforming electricity markets and ensuring that any reform options taken forward focus on protecting billpayers and encouraging investment.”
