Ofgem, the UK’s electricity and gas regulator, is concerned that with increasing numbers of both domestic and industrial users at least partly-off grid, there is a looming shortfall in the costs for running the network.
It is seeking to address this through its Targeted Charging Review, which recently closed the consultation period with industry.
Most users have responded positively to this principle, recognising that everyone should pay something towards the network’s fixed costs. But they’ve been keen to ensure that this does not discourage investment and costs are proportionate to use.
Ofgem are proposing a new fixed charge by user category (i.e. domestic, retail/ light industry, large users). On current information, this model will increase price differences by region, meaning the North West’s charges are 26 times that of the lowest charged regions. These regional disparities would increase by a further ten-fold for Iggesund Paperboard, based in Cumbria, under the other charging model Ofgem are still considering.
This would mean several millions of pounds in extra fees for manufacturers across the North West and would be a significant blow for the region, where manufacturing industry employs over 340,000 people and contributes £26bn to the UK economy.
At a time of increased economic uncertainty, energy intensive industries in the UK already face high costs versus other EU competitors. Now, industries based in the North West will be hit with a double-disadvantage with increased costs.
Ironically, this moves against the Government’s own intentions. Investment in combined head and power plants (CHPs) has been strongly supported by the Government and remains vitally important to the UK. Some 80% of the paper manufactured in the UK is made at the 15 paper mills with a CHP generator.
“This is truly outrageous,” says Iggesund Paperboard Mill director Ulf Lofgren. “We need stable and predictable conditions, and when Ofgem suggests a charging model which includes geographical discrimination within the UK, we are baffled. What has the north-west of England done wrong to deserve this?”
