Ed Miliband’s proposed energy strategy could create a “postcode lottery” adding hundreds of pounds to household bills and jeopardise net zero plans
Experts have warned the scheme would be a “nightmare” that could add £300 to bills, directly contradicting Labour’s promise that households would save £300 by 2030.
The controversial plan would divide Britain into 12 different pricing zones, benefiting Scotland and northern England while causing bills to surge in the South.
Analysis shows wholesale rates in Scottish regions would fall by almost £8 per megawatt hour under zonal pricing, while rates on the south coast would surge by £10 per megawatt hour.
This would ultimately cost southern households hundreds of pounds more annually, creating winners and losers based solely on geographic location.
International examples show the potential impact of zonal pricing. In countries where this system exists, some customers pay £200-£300 more than equivalent households based solely on location. Norway, Sweden, Denmark and Australia all use zonal pricing systems.
Professor Kelly described the Ed Miliband’s net zero timeline as ‘moonshine’PAIn countries where zonal pricing exists, some customers find themselves paying £200-£300 more than an equivalent household for energy based solely on where they live,” Alistair Phillips-Davies of SSE said.
He added that zonal pricing “would not address the fundamental realities of energy infrastructure”, noting that large-scale solar and wind farms cannot be built in urban centres.
The current UK system already creates some regional disparities, with those in north Wales and Mersey paying around £90 more annually than southern households due to differences in standing charges.
Northern regions also pay inflated rates because households are further apart, making power transportation more expensive.
Zonal pricing would invert this system, benefiting areas with high numbers of turbines and substations while penalising zones with higher demand.
This would create a stark divide between energy-rich northern regions and the more populated south.
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Public opinion strongly opposes zonal pricing, with a survey by OnPath Energy finding 85 per cent of respondents believe the model is “not very fair”.
More than 50 companies and 16 trade bodies have urged the Government to abandon the plans.
Richard Dunkley, of OnPath Energy, said: “Ultimately, consumers and businesses will be paying the price for years to come if we get this wrong.”
Zonal pricing, Dunkley continued, could have “potentially disastrous” consequences for investment and jobs, and that “billions of pounds worth of planned renewable projects may have to be put on hold or re-worked” if the policy were given the green light.
He added: “For zonal pricing to work, it has to have winners and losers, which would result in damage to critical areas of our industrial base and also higher bills for millions of consumers.”
However, Greg Jackson, chief executive of Octopus Energy, defended the approach, claiming households would remain exposed to “skyrocketing bills” without overhauling Britain’s “outdated pricing system”.
Jackson argues zonal pricing “unlocks massive savings” by encouraging energy use closer to production sites.
A review into Britain’s energy pricing has proposed this model, which has been heavily endorsed by the bosses of Ofgem and Octopus Energy.
Labour is understood to be seriously considering these plans as part of the “Review of Electricity Market Arrangements” initiated by the Conservatives.
Modelling by consultancy firm LCP found that by 2035, wholesale prices would be significantly lower in northern Scotland, where electricity demand is low and infrastructure is already abundant.
The rest of the country would face higher wholesale prices compared to the current national pricing system.
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Regions with high numbers of turbines and substations would enjoy lower prices, while zones with higher demand would face higher costs. This would create a stark north-south divide in energy costs.
The LCP consultancy report found that higher price areas would account for 97 per cent of energy demand across the country.
This means “nearly all consumers will be paying increased wholesale prices for their energy” under the zonal system.
Phillips-Davies of SSE, which commissioned the report, warned that Britain was “on the cusp of the greatest transformation since the Industrial Revolution” as it moves towards clean power by 2030.
However, he cautioned that zonal pricing would be a “political and economic nightmare” that would jeopardise the net zero transition.”