The head of Britain’s biggest energy supplier has claimed his competitors oppose proposals for so-called postcode pricing because they financially benefit from the current system.
Octopus Energy chief executive Greg Jackson told Sky News his business’s rivals were against customers being charged based on where they lived, rather than on a national basis, because they would lose out on profits.
He said: “A very small number of companies that today get paid tens of millions, sometimes in a single day, to turn off wind farms and generate gas elsewhere, don’t like it.
“The reason you’re seeing that kind of behaviour from the rivals is they are benefiting from the current system that’s generating incredible profitability.”
The government is currently considering whether to introduce the policy, which is also known as zonal pricing. Energy secretary Ed Miliband is expected to make a decision on the proposals by this summer.
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Octopus has become Britain’s biggest supplier with more than seven million customers.
Mr Jackson has been a vocal proponent, as he said he wants to charge customers less and boost government electrification policies by having cheaper electricity costs.
What is postcode pricing?
Zonal pricing would mean electricity bills are based on what region you live in.
Some parts of Britain, like northern Scotland, are home to huge energy producers in the form of offshore wind farms.
But rather than feeding electricity to local homes and businesses, power goes into a nationwide auction and is bought to go across Britain.
As the energy grid is still wired for the old coal-producing sites rather than the modern renewable generators, it’s not straightforward to get electricity from where it’s increasingly produced to the places people live and work.
That leads to traffic jams on the grid, blocking paid-for electricity moving to where it’s needed and a system where producers can be paid a second time, to power down, and other suppliers, often gas plants, are paid to meet the shortfall.
Zonal pricing is designed to prevent paying the generators for power that can’t be used.
It would mean those in Scotland have lower wholesale energy costs while those in the south, where there is less renewable energy production, would have higher wholesale costs.
Whether bills go up or down depends on implementation.
Savings from one region could be spread across Britain, lowering bills across the board.
Mr Miliband has said he’s not going to decide to raise prices.
However, SSE’s chief executive Alistair Phillips-Davies described the policy as a “distraction” and said it could affect already agreed-upon upgrades of the national grid that will lower costs.
“I think you’ve got a very, very small number of people who are asking for this. It’s just a distraction. We should remove it now,” he said.
While Octopus Energy estimates that said postcode pricing could be introduced in two to four years, Mr Phillips-Davies said it could take until 2032 before it was implemented, by which time Britain would have “built much of the networks that are required to get the energy from these places down into the homes and businesses that actually need it”.
“We just need to stay true to the course,” he added.
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Unions, as well as industry and energy representatives, have also spoken out against the policy. Opponents include eco-tycoon Dale Vince and trade body UK Steel.
A joint letter signed by SSE, UK Steel, Ceramics UK and British Glass, along with the unions GMB, Unite and Unison, said zonal pricing could lead to scaled-back investment due to uncertainty and higher bills.
A separate letter signed by 55 investors, including Centrica and the Ontario Teachers’ Pension Plan, has also criticised the policy.
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Businesses facing fresh energy cost threat
However, Mr Jackson said many investors had not voiced opposition, with thousands of small and medium businesses instead backing the policy in the hope of paying less on energy bills.
