SNP fail: When a surcharge turns out to be a subsidy

SNP fail: When a surcharge turns out to be a subsidy

by Stuart Crawford
article from Wednesday 17, January, 2018

SOME SNP politicians have been kicking off lately about a so-called surcharge that electricity consumers face in the North of Scotland. As is so often the case with claims about energy costs, only part of the story is being told and the truth is entirely different. When the whole picture is viewed the energy price in the North of Scotland turns out not to be subject to a surcharge at all – but in receipt of a generous subsidy.

Further, this subsidy is provided by consumers from across Great Britain, and were there to be Scottish independence the subsidy would evaporate and the electricity costs would have to rise – considerably!

The details are available for everyone to see. Back in 2015 Ofgem published a detailed report on the regional differences in electricity and gas charges across Great Britain. It found that while electricity and gas charges do vary within Britain, the extra electricity charge of up to 2p per unit in North Scotland it was categorical that the variation cannot be described as a ‘surcharge’.

The Hydro Benefit Replacement Scheme is paid by all British consumers and is worth about £57 million per year and, for a typical domestic consumer in the North of Scotland, reduces the electricity distribution charges by about £41 per year. Moreover, to ensure their electricity charges are no different to the mainland, consumers in Shetland also receive a subsidy through the Common Tariff Obligation, worth £28.5million in 2014/15.

Ofgem’s mapping of the differences in network charges and bills across Great Britain showed that:

1)    electricity distribution charges were generally higher in the north than the south (with a few exceptions such as Merseyside/ N. Wales and SW England);

2)    electricity transmission charges for demand consumers were generally higher in the south than in the north; and,

3)    gas distribution charges were also generally higher in the south than in the north.

In considering the impact of equalising all charges Ofgem found that although North of Scotland consumers would benefit by less than £10 per year for a typical consumer, those in South Scotland would face an increase of nearly £20 per year.

The biggest winner would be consumers in South West England, benefitting by nearly £40 per year. It needs to be understood that to save consumers in the North of Scotland the SNP would have considerably more Scottish consumers pay double that saving – while many English consumers would be especially better off.

Furthermore, if there was a move to cross-subsidise electricity charges across Britain it would be politically very difficult to refuse to do this also for gas – where gas charges in Scotland are currently generally lower than in England and Wales. The same goes for electricity transmission charges that are currently also lower in Northern Scotland than elsewhere.

The SNP has to stop inventing grievances where they are in fact benefits if it is to win its larger case for independence.

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