Standing Charges (Highlands and Islands)

– in the Scottish Parliament on 29th September 2022.

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Photo of Emma Roddick Emma Roddick Scottish National Party

4. To ask the Scottish Government whether it has had discussions with the Office of Gas and Electricity Markets regarding reported higher standing charges for energy in the Highlands and Islands. (S6O-01399)

Photo of Michael Matheson Michael Matheson Scottish National Party

The increase in energy prices in recent months remains a huge worry for many consumers. That is especially true for those in the Highlands and Islands, where the additional costs of distributing energy are higher than in other parts of the country.

The structure of customers’ energy bills, including standing charge levels, is reserved to the United Kingdom Government. Although that means that we have no option to intervene directly, we continue to provide consumers with as much support and advice as we can. We are also raising specific issues of concern with the UK Government and Ofgem.

Photo of Emma Roddick Emma Roddick Scottish National Party

It is clear from that, and from so many other penalties that the Highlands and Islands face for being a net exporter of clean green energy, that the UK Government will never work for the communities that I represent and that it will instead leave them to suffer extreme fuel poverty.

Does the cabinet secretary agree that we could and should do much better in Scotland and that we should call for energy policy to be devolved?

Photo of Michael Matheson Michael Matheson Scottish National Party

I acknowledge the specific concerns that the member’s constituents have and the higher costs that people in remote and rural areas and the islands face in meeting energy charges. To some extent, the existing mechanism penalises individuals who live in those areas as a result of the way in which Ofgem and the UK Government regulate the process.

Where we have scope to take action, we are doing so. For example, through our area-based schemes, we provide funding to deliver energy efficiency improvements in areas with the highest levels of fuel poverty. We have committed to continuing to spend more per head of population in our remote and rural areas because of the significantly higher levels of fuel poverty there and the additional costs that are associated with the work that is necessary.

The member has hit the nail on the head. Given the absolute shambles that we have had with the UK Government’s management of energy policy over an extended period, there is no doubt in my mind that an independent Scotland would be able to manage our energy policy in a much more effective way that reflects the needs of constituents in areas such as the Highlands.

Photo of Liam McArthur Liam McArthur Liberal Democrat

As Emma Roddick has suggested and as the cabinet secretary acknowledged, standing charges have been a particular issue of late. The lifting of the cap in April resulted in a 1p per day increase for gas but a doubling to 45p per day for electricity. Does the cabinet secretary agree that, in the justification for that rise, there has been a suggestion that that is to pay back the moneys lost from companies going bust over the past couple of years, many of which could not be used by customers in the Highlands and Islands because of the total heat with total control mechanism? Will he agree to engage directly with Di Alexander, who is the chairman of the Highlands and Islands housing associations affordable warmth group, on the representations that can legitimately be made to Ofgem and UK ministers about the inherent unfairness in how those standing charges have been structured?

Photo of Michael Matheson Michael Matheson Scottish National Party

On Liam McArthur’s final question, if Mr Alexander wants to write to me about his proposals, I would be more than happy to share that with my officials and as part of our representations to the UK Government on the matter.

There is no doubt in my mind about the impact, which the member rightly highlights, that standing charges have on people who live in our remote and rural communities and on our island communities such as Orkney. That is why the system must be reformed. It is presently calibrated in such a way that it penalises people who live in our remote and rural communities.

The member asked if some of the costs are associated with market failure. The companies whose energy purchasing was unhedged have gone bust. As a result of that, the taxpayer has to pick up the tab. That happened because the UK Government’s regulator allowed unhedged companies to operate in the market. That should never have been allowed in the first place. The blame for the billions of pounds that consumers throughout the country will now have to pay back as a result falls squarely at the UK Government’s door for its failure to regulate the energy markets properly on behalf of consumers.

The Deputy Presiding Officer:

Question 5 was not lodged.