Scottish businesses to save millions as Gov retains Hydro Benefit Replacement Scheme

Businesses and households in the North of Scotland will save a total of £50m a year on their energy bills following the Government's decision to retain a scheme to help with electricity distribution costs.

According to the Government, the Hydro Benefit Replacement Scheme offers protection from higher distribution costs faced by electricity users in the far north of Scotland, when compared with other parts of the UK.

The Government’s decision to keep the scheme comes after a public call for comments on the scheme, which it claims will provide a £36 reduction on an average electricity bill to the 690,000 domestic consumers in the North of Scotland.

Respondents considered that the scheme continued to meet its policy objectives, both because the North of Scotland would otherwise have the highest distribution costs by a significant margin, and because there is a relatively higher incidence of fuel poverty in the remote rural communities of that area.

Responding to the comments, DECC said that the scheme “remains justified and is appropriately designed”. It added that it is clear that the scheme’s removal would adversely impact domestic and non-domestic electricity customers across the North of Scotland.

The 70,000 non-domestic consumers in the region will benefit from the remaining £25m worth of reductions, the Government says.

Energy Secretary Edward Davey used the decision to highlight the benefits of Scotland remaining part of the UK, as the country prepares for next year’s vote for independence.

Davey said: “Thanks to the size of the British energy market we have been able to spread that cost. It is another example of how Scotland benefits from being an integral part of a larger British market.”

“The beautiful but sparsely populated and rugged expanse of Northern Scotland means maintaining the electricity network costs much more than other parts of the UK and it is not fair that people from the area should have to shoulder the costs of this,” he added.

The Secretary of State for Scotland, Michael Moore said: “Today’s announcement underlines that the UK Government is not only securing large investments in the flourishing Scottish energy industry but we are ensuring that Scottish consumers and businesses in places like Thurso, Ullapool and Wick are benefiting from spreading the costs of electricity bills across the whole of Britain’s large energy market.”

In addition, the Government is also retaining the Common Tariff Obligation – which prohibits suppliers from charging comparable domestic consumers different prices on the basis of their location in the North of Scotland.

While there is a legal requirement for Government to review the Hydro Benefit Replacement Scheme every three years, there is a Ministerial commitment to review the Common Tariff Obligation at the same time.

Leigh Stringer

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