Introduction to Postcode Pricing
The head of the largest energy supplier in Great Britain has claimed that its competitors reject suggestions for the so-called postcode pricing because they benefit financially from the current system. Greg Jackson, managing director of Octopus Energy, stated that rivals of his company were against customers being charged based on where they lived, rather than on a national basis, because they would lose profits.
The Current System
A very small number of companies are paid tens of millions today, sometimes in one day, to switch off wind farms and create gas elsewhere. They don’t like the idea of postcode pricing because they benefit from the current system that causes incredible profitability. The government is currently considering whether to introduce politics, also known as zonal pricing. The Minister of Energy is expected to make a decision about the suggestions this summer.
What is Postcode Pricing?
Postcode pricing, or zonal pricing, would mean that electricity bills are based on the region in which they live. In some parts of Great Britain, like North Scotland, huge energy generators are native, in the form of offshore wind farms. However, instead of supplying electricity to local houses and companies, power goes into a nationwide auction and is bought to be used throughout the UK.
The Impact of Postcode Pricing
Since the energy network is still wired for the old coal-producing locations and not for modern renewable generators, it is not easy to maintain electricity where it is increasingly produced, in the places where people live and work. This leads to traffic jams on the grid, blocks that paid electricity reaches the place where it is needed, and a system in which manufacturers can be paid for a second time to lower, and other suppliers, often gas systems, are paid for the encounter with the deficiency. The zonal pricing is intended to prevent generators from being paid for power that cannot be used.
Opposition to Postcode Pricing
Unions, as well as representatives of industry and energy, have also spoken out against the politics. The opponents include the eco-tycoon Dale Vince and trade body UK Steel. In a joint letter, SSE, UK Steel, Ceramics UK, and British Glass, together with the unions GMB, Unite, and Unison, stated that zonal pricing could lead to scaled investments due to uncertainty and higher bills. A separate letter signed by 55 investors also criticizes the guideline.
Support for Postcode Pricing
However, Jackson said that many investors had not expressed opposition, and thousands of small and medium-sized companies instead supported the politics to pay fewer energy bills. Octopus Energy estimates that postcode pricing could be introduced in two to four years, while others claim it could take until 2032 for energy from these places to reach the houses and shops that actually need it.
