Starmer intervenes over plans for higher energy bills in the South

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2 days ago

Sir Keir Starmer has intervened in controversial net zero proposals to make homes and businesses in the South pay more for power than those in the North, amid fears of a voter backlash.
In recent days, Downing Street has taken a growing interest in plans for so-called zonal electricity pricing being considered by Ed Miliband, the Energy Secretary. No10 officials have contacted industry chiefs to signal that the Prime Minister is overseeing the potential policy.
Downing Street is understood to have requested a further review of the costs and benefits – raising the prospect that the idea could be killed off or kicked into the long grass.
Zonal pricing aims to capture efficiencies by lowering the relative cost of electricity close to wind farms and has already sparked a bitter war of words among energy bosses.
It would result in Britain being divided into zones, with prices in each based on local supply and demand. There is currently one national price.
Supporters claim the switch would lead to savings of £52bn for consumers overall, as well as a £27bn saving on grid upgrades that would no longer be required.
Sir Keir's intervention is the latest sign of tensions within Labour over net zero. Pledges on job creation, investment in carbon capture technology, and heat pump and electric car targets have all sparked fierce policy debates across Whitehall.
Mr Miliband's officials are said to be supportive of zonal pricing but the Energy Secretary himself has yet to declare a position.
Whitehall sources insisted no final decisions had been made and that a range of views were still being considered.
The involvement of Downing Street will be interpreted as a sign of political anxiety about the controversial policy.
Nigel Farage's Reform UK has made net zero and the cost of energy a key campaign issue and pledged to fight plans to roll out renewable power projects and pylons across the countryside.
Giving a speech in Scotland this week, Mr Farage likened the Government's net zero policies to 'the next Brexit'.
In practice, a zonal system would mean higher wholesale power prices for London and the South compared with the North and Scotland, where most wind farms are concentrated.
But supporters say it would slash bills for consumers overall, by reducing the need for costly grid upgrades and slashing the amount paid to wind farms to switch off.
A report by FTI Consulting this year predicted overall savings under zonal of £52bn for consumers over 20 years.
Another report by the same firm, commissioned by Octopus Energy and shared with Mr Miliband's officials, also found that £27bn less would need to be spent on major grid upgrades under the reforms, resulting in nearly 2,000 fewer miles of cables.
The claims of savings are disputed by opponents, who say a major market shake-up will deter investment and imperil the Government's plans for a renewable energy construction boom this decade.
Ministers have argued that the Government's strategy for a power system running almost entirely on renewables by 2030 will bring down prices and provide Britain with greater energy security.
Asked to comment on the involvement of Downing Street, a spokesman for Mr Miliband's department refused to comment on 'speculation'.
But Andrew Bowie, the shadow energy minister, said the Prime Minister's move to scrutinise zonal pricing more closely implied lack of faith in the Energy Secretary.
He said: 'It suggests that the PM does not trust Ed Miliband to take a decision of this magnitude.'
The Government has previously pledged to make a decision by the middle of this year, ahead of a renewable energy auction in the summer that will hand subsidies to major wind farm projects that are vital to Mr Miliband's clean power goals.
That has prompted warnings from wind farm developers that embarking on a major shake-up of the electricity market now will create unnecessary uncertainty, leading to the cancellation of schemes or demands for higher power prices to compensate.
Keith Anderson, the chief executive of Scottish Power, last month urged ministers not to 'snatch defeat from the jaws of victory' by pushing ahead with the reforms.
At the same time, ministers are under intense pressure to cut energy bills for households and businesses following Mr Miliband's pre-election promise to slash them by £300 a year.
Critics say the existing national pricing system also distorts the market – for example, by encouraging batteries to charge at the wrong times and inter-connectors to send power from Britain to Europe even when it is needed in the South.
In recent months, the Government has sought to quell wind developer concerns about the policy by suggesting that existing schemes will benefit from 'grandfathering' – meaning they would retain current payment terms.
Mr Miliband is also weighing up an alternative proposal that would seek to reform the national electricity pricing system to better reflect 'locational signals', although these have not been fleshed out.
A key moment in the debate is likely to come next week, when Mr Miliband is expected to make his recommendation, for or against zonal pricing, to Downing Street.
If zonal pricing is implemented it would be the biggest shake-up of the market since privatisation in the 1990s.
Richard Tice, Reform UK's energy spokesman, said: 'Zonal pricing is a trick designed to try to cover up the ever-rising energy bills we face because of subsidies to renewable energy.
'Keir Starmer is now panicking over the costs of renewables and the loss of votes to Reform.'
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