THERE must be “urgent action” to end a discrepancy in a UK Government scheme which leaves northern Scots with higher energy bills than the rest of the country, the SNP have said.
A recent report revealed a "distortion" in the Hydro Benefit Replacement Scheme (HBRS), resulting in more expensive bills for those living in northern Scotland.
Under the HBRS scheme, power suppliers are charged in order to help ease the financial burden, which cost the UK £92.7 million last year.
Energy regulator Ofgem estimates average bills in the north of Scotland would be around £60 a year higher without the scheme.
However, the way the scheme currently operates has benefitted “embedded” power generators by a staggering £49 million over three years, the report found.
Onshore wind farms, other small scale generators such as solar farms or combined heat and power plants, are the types of producers who have benefitted, the report said.
The report, which is part of a legally required three-yearly review, explains: “As part of the last statutory review of the Hydro Benefit Replacement Scheme, a concern was raised that an ‘embedded benefit’ distortion may exist within the scheme’s current operating arrangements.
“The Government has assessed this and found that an embedded benefit does arise from the net changing basis of the scheme, with the likelihood that this results in higher overall consumer costs.”
The UK Government was warned about the issue in 2019 by National Grid ESO, and insisted they could not calculate the loss felt by northern households.
The document said: “Estimating the size of this consumer loss is difficult due to the inherent complexity that arises from a multitude of different arrangements between suppliers and generators.
“Similarly, estimating the potential consumer benefits from the removal of the embedded benefit is also made difficult by this complexity.”
Drew Hendry, SNP MP for Inverness, Nairn, Badenoch and Strathspey, claimed the north of Scotland was “overlooked” by the UK Government.
He called on them to urgently end the “unfair penalisation” of Scottish energy producers who are charged more for transmission charges.
Hendry said: “Many Scots living in the north will be scratching their heads as to why, when they’re able to see clean renewable energy being generated in their back gardens, they continue to be charged more for electricity than anywhere else in the UK.
“It should be unthinkable that energy rich regions like the Highlands and Islands, also have the highest rates of fuel poverty across all nations of the UK.
“That this latest additional energy penalty is down to yet another UK Government mistake, one that has punished northern Scots for years, is a disgrace and must be urgently rectified.
“They must also work to end the unfair penalisation of Scottish energy producers who are charged more than anywhere else for transmission charges, sending energy bills skyrocketing even further for Scottish households and businesses.
"If they won't it'll prove once again why only with independence can Scots get a fair deal on energy."
BEIS, who have been contacted for comment, confirmed last year it was investigating the anomaly in the scheme.
The UK Government is proposing that instead of calculating the supplier charge on net demand, it should be on the basis of gross.
They say this would mean suppliers are charged according to their total share of electricity use - regardless of source.
The north of Scotland region encompasses the Highlands and islands, Grampain and Tayside.
Across the UK, the region consistently pays the highest distribution costs, and campaigners have called for more action.
The scheme has been in place since the 1940s when it was decided to offset the high costs of providing power to remote consumers in the north by the contribution of dams and small hydro-electic stations in the area.
