Ministers must instruct Ofgem to look at geographic tariff – Carmichael

Orkney and Shetland MP, Alistair Carmichael, has today called for government ministers to instruct energy regulator Ofgem to look at options for a “geographic tariff” to reduce bills for areas with high fuel poverty in the Highlands and Islands. Speaking during a debate led by Inverness MP Drew Hendry on the concept of a rebate on standing charges for people in the Highlands and Islands, Mr Carmichael said that “every little helps” including such a rebate, but that standing charges were only a “small part of the equation” in tackling fuel poverty compared to overall energy costs.

Speaking in Parliament, Mr Carmichael said:

“[Mr Hendry] brings us the interesting and constructive proposal of a standing charge rebate. When it comes to the question of energy costs, I have long taken the view that every little helps. Frankly, it does not really matter whether it is a silver bullet: if there is some benefit to be had, we should take it. That was the view I took on the Alternative Fuel Payment brought forward by the Government last year: it helped a bit, and a bit of help is better than nothing.

“Standing charges are a small part of the equation when it comes to the question of energy costs and the actual cost involved in heating people’s homes. The unit price is where the real action is to be found, and it is there that I would like to focus some attention, not least because I understand that Ofgem is carrying out a consultation on a social tariff. That is an interesting idea, and one that I think would command a fair degree of support across the whole House.

“Within that social tariff, there surely has to be some mechanism for geographical variation, because social is not just on the basis of income. It has to bring in other factors as well, such as the fact that we live in places that have longer, darker and colder winters.

“When we drill down into the figures and the regulation of the market, the other injustice is the rate charged to people on prepayment meters, who by definition are under the greatest financial pressure in relation to energy. The rate charged in the highlands and islands is 62.3p per day in standing charges and 27.19p per kilowatt-hour. If people in the north of Scotland pay by direct debit they pay 59.38p per day, whereas somebody who has to rely on a prepayment meter pays 66.23p per day. In what universe is that a sensible and fair system?

“The fact that we are now so far from the idea of a universal, standard price for energy across the whole country shows just how badly wrong the regulation of the market has gone. Responsibility lies at Ofgem’s door. I wish we could see more proactivity from Ofgem, which had to be taken kicking and screaming to get to the point of consulting on a social tariff. If the Minister could instruct it to look at the issue and achieve meaningful change, she would be doing some genuinely good work.”