Britain’s most senior government ministers could soon be drawn into a deepening row over plans to charge some households higher electricity bills than others, as Ed Miliband prepares to decide on sweeping energy reforms.
The energy secretary is understood to be close to making a decision on whether to move ahead with proposals to replace the country’s single electricity market with several market zones.
Miliband is expected to make his recommendation to cabinet colleagues within the coming weeks before a final decision from the government on “zonal pricing” by the middle of this year.
Under the proposals, different areas of the country would pay differing rates for their electricity based on supply and demand levels in the local area.
This could mean that energy users in the north of Scotland would pay some of the lowest market prices in the country, while market prices in the south of the country would climb.
After a “write-around” to other government departments across Whitehall, ministers are expected to give their view on the plans that have already proven highly divisive in the energy industry.
Industry sources expect that this process will widen the argument over “postcode electricity pricing” that will have an impact on major businesses, investment and jobs.
The models analysing the impact of zonal pricing will be carefully scrutinised by the business and Treasury departments as well as the offices for Wales and Scotland, the sources added.
Industry players in support of the plans – including Octopus Energy, the UK’s biggest household energy supplier – believe zonal pricing could make the energy system more efficient and save consumers money.
Major renewable energy developers including SSE and Scottish Power claim that upending the market could put billions of pounds in investment and thousands of jobs at risk if major projects are delayed or derailed by the uncertainty created by the changes.
The debate will extend across Whitehall weeks after the energy sector regulator, Ofgem, warned companies against ratcheting up their opposing campaigns in what sources have described as one of the industry’s “ugliest” lobbying drives.
To date, the lobbying has included contradictory paid-for research by third-party consultants, opinion surveys, open letters to government departments and multiple opinion columns in national newspapers.
In a rare intervention, Ofgem’s chief executive, Jonathan Brearley, warned the industry against “lobbying on polarised positions” and urged companies to hold “an honest conversation” about the plans.
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Industry sources have told the Guardian that Miliband has not yet made a decision on the debate.
A spokesperson for the Department for Energy and Net Zero 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 considering reforms to Britain’s electricity market arrangements, ensuring that these focus on protecting bill payers and encouraging investment. We will provide an update in due course.”
Separately on Wednesday, it emerged that Miliband plans to ban the UK’s national energy company from investing in projects that use solar panels linked to Chinese slave labour.
The energy secretary has dropped his previous opposition to rewriting the bill that would establish Great British Energy and now plans an amendment that forces the company to make sure there is no slavery or human trafficking in its supply chain.
The UK government will this week co-host a major UK summit with the International Energy Agency.
