OREANDA-NEWS. June 18, 2015. Alistair Phillips-Davies, Chief Executive of SSE, has today written to the Secretary of State for Energy and Climate Change, Amber Rudd MP, urging her department to work towards a simpler and fairer energy market.

It follows recent media and political interest, particularly in Scotland, in the fact that all electricity suppliers currently face different costs for transporting electricity in different parts of Great Britain. 

SSE has been making the case for some time that it would make sense for these transport costs to be 'flattened out', so that there is one standard charge for every customer across Great Britain. Reforms require regulatory change and SSE is keen that this happens as soon as possible.

The full letter follows below:

Dear Secretary of State

Working toward a simpler and fairer energy market 

You will be aware that over the last few months there has been interest from consumers in the differences in the costs of transporting electricity across parts of Great Britain, and the implications of this for consumer bills. This matter affects all energy consumers, including SSE’s customers and I wanted to write to update you on these matters. 

You will be aware that the reason for regional differences in electricity prices is due to the different costs charged for transporting electricity across Great Britain. The companies operating the electricity networks in areas including the North of Scotland and North Wales face larger costs per customer because of a number of factors, including the land mass they cover, the diverse terrain and remote housing. SSE’s network business SSEPD operates the electricity networks in the North of Scotland – the largest land mass covered by a single network company – and therefore we have some experience of this. The energy suppliers operating in these regions pay the charges to the network companies, which leads to regional price differences for customers, depending on where they live. Whilst some Government interventions narrow the scale of the differentials, such as the Hydro Benefit, as you know they do remain.

SSE believes that the variations in network costs across the Great Britain causes customer confusion, especially in the domestic market.  SSE has long been making the case for tackling this and simplifying energy prices for customers.  We think the benefits of   a move to ‘national pricing’ with the electricity transportation costs flattened out to one standard charge for every customer across Great Britain are worth considering.  

Our position has been informed through speaking to our customers and the results are clear: consistently two thirds of people support an end to regional price differentials and a move to ‘national pricing’. 

With the change the network companies would continue to receive the same income for their necessary maintenance and investment work, but the costs would be spread fairly and equitably across all regions, resulting in an end to these price differentials. This would also make things far simpler for customers and facilitate switching and tariff comparison. To make these changes requires legislative or regulatory change. I am therefore copying in Ofgem.

I hope that you will consider this issue as part of the forthcoming consultation on distribution costs for customers in the north of Scotland compared to that of other regions in GB, which was proposed in the Budget in March 2015. SSE will of course respond positively to this consultation. 

I look forward to hearing from you and progressing the case for national pricing to make the energy market fairer and simpler. 

Due to the continued public interest in this issue a copy of this correspondence will be published on SSE’s News and Views website.

Yours sincerely

Alistair