Octopus Energy and Scottish Power in row over zonal pricing

The National

14-05-2025

Greg Jackson has slated Keith Anderson, the chief executive of Scottish Power, who is urging ministers against the introduction of zonal pricing, which would split the UK into price regions based on local supply and demand.
Octopus Energy has said repeatedly that such a system could mean Scots benefit from some of the lowest energy prices in Europe.
But the UK Government has said it will not split the country's energy market into regions if it raises people's bills in some areas.
A decision on the issue is expected to be made in the coming weeks.
READ MORE: Scottish households will pay more for energy than London, data says
Anderson is set to tell delegates at the All-Energy trade show in Glasgow and "it is important the government is careful not to snatch defeat from the jaws of victory", urging ministers not to "derail the stable policy framework that attracts that capital".
Anderson will say: "Don't tamper with a system that works. Policy uncertainty on big market reforms such as zonal pricing does not help in this regard."
Jackson (below) has said the argument from Scottish Power is "astonishing".
(Image: Tony Blair Institute for Global Change) He posted on Twitter/X: "It's astonishing to see an energy boss saying this is a 'system that works'. It may work for incumbent energy generators but it doesn't work for households or businesses struggling with Europe's highest energy costs.
"The case for reform is clear."
Despite claims zonal pricing would turn the UK energy market into a postcode lottery, analysis showed last month households in Scotland will already be paying more for electricity in the next year than those living in London.
READ MORE: John Swinney won't pick side as energy giants debate zonal pricing
Consumers in north Wales and Merseyside will pay £120 more than households in London for their electricity over the coming year, Cornwall Insight forecasts, while those in the north of Scotland will pay £96 more than those in the capital.
The large differentials stem from variation in the charges levied on bills to fund the upkeep of Britain's 14 regional electricity distribution networks, which are regulated by Ofgem.
The headline figure for the energy price cap on standard tariffs, which stands at £1849 a year at present, is a national average that masks such regional differentials.
Octopus Energy's director for regulation Rachel Fletcher told the Sunday National earlier this year the arguments being made against zonal are 'overblown', adding the single wholesale price setup in the UK is 'bonkers and broken'.
At the moment, Britain has one national energy price even though at any point in the day the cost of producing electricity differs radically around the country.
READ MORE: Scots could get free electricity from zonal pricing, Octopus Energy boss says
If an offshore wind farm in Scotland produces more electricity than the network can handle it is paid to turn off, or "constrained", and a gas-fired power plant in the south of England is paid to turn on.
The constraint costs – which are collected from consumers – are huge and in 2022/23 they amounted to £1.5 billion and are projected to rise to £3.7bn by 2030, something Octopus considers a 'staggering waste of electricity'.
Fletcher said the system is only going to become more wasteful as time goes on, and while she believes a zonal pricing system needs to be designed 'carefully', she said it makes logical sense to make the transition.
Fletcher insisted there is plenty of evidence internationally of zonal pricing markets being extremely successful in attracting renewable investment, so there is no reason to believe that can't be replicated in the UK.
She said: 'The international evidence does not support the idea that zonal would be a disaster for renewable investment.
"It is untenable to say that zonal is incompatible with investment in renewables.'