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Unfairness of Orkney’s Energy Standing Charges

Orkney Constituency MSP, Liam McArthur, LibDem. has spoken about the unfairness of standing charges for rural and island communities’ following recent price cap rises.

Speaking in the Scottish Parliament during Net Zero and Energy Questions, Liam McArthur highlighted that Ofgem’s price cap rise in April saw a 1p per day increase in standing charges for gas whereas electricity almost doubled to 45p per day. This has led to off-gas grid areas such as Orkney, already subject to higher energy costs, facing a further disproportionate rise.

Highlands and Islands SNP MSP Emma Roddick asked The Cabinet Secretary for Net Zero, Energy and Transport , Michael Matheson, about  the higher standing charges for energy in the Highlands and Islands.

Michael Matheson replied:

“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.

“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.

“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.”

Liam McArthur said:

” 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?”

Michael Matheson said that he would be more than happy to share Di Alexander’s proposals with his officials and as part of the Scottish Government’s representations to the UK Government on the matter if he sends them on to him.

And he continued:

“There is no doubt in my mind about the impact 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 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”

Commenting afterwards, Liam McArthur said:

“As an off-gas area, Orkney is far more reliant on electricity as well as heating oil. The wildly disproportionate rise in standing charges for electricity as opposed to gas has therefore compounded the problem of high energy costs for islanders.

“Ultimately, this is a decision for Ofgem and the UK Government.  I have worked closely with HIHAAW Chair, Di Alexander, to expose the ever-increasing divide between dual-fuel and off-gas areas and make the case to UK Ministers and the regulator for the social and environmental cost levy applied to bills to be equalised across gas and electricity bills.

“I hope the Cabinet Secretary will now work with HIHAAW and lend weight to these arguments in his own discussions with his UK counterparts and Ofgem. Along with introducing a cap on heating oil, levelling out standing charges would deliver greater fairness and go some way to tackling the sky high levels of fuel poverty in our island and rural communities.”