Danger zone
Keeping the Lights On , Issue 1648
ed-miliband.jpg
LOCATION, LOCATION, LOCATION: Is Ed Miliband really going to bring in zonal electricity pricing?
Old Sparky writes… VEHEMENT campaigning for and against the government's proposal for introducing regional or "zonal" electricity pricing has erupted just as Eye 1644 anticipated – and energy secretary Ed Miliband is on the back foot.

"Could zonal pricing bring down the government?" reads one hyperbolic headline. Wild numbers are being bandied. Rarely has an obscure technical issue like this been a matter for such shrill public lobbying.

In today's electricity market, a single wholesale price, set by the dynamics of supply and demand, prevails over the entire grid, a bit like the single postage rate for a letter, wherever it is going from or to. But there are big regional variations in actual costs.

Lottery ticket
Everyone knows change would result in short-term "postcode lottery" winners and losers, despite Miliband's protestations – regional price differentials are the whole point.

The pro-zonal lobby asserts that geographical price signals would drive system efficiencies, ultimately reducing the need for capital investment as the grid expands and decarbonises.

Conspicuous in this camp are Octopus Energy (the UK's largest supplier); Ofgem's ever-political chief executive Jonathan Brearley (Eyes passim); Amazon and other operators of energy-hungry data centres; and various paid lobbyists and other organisations they have roped in.

Fearing costly market disruption, against them are ranged prominent suppliers Ecotricity, SSE and British Gas; energy- intensive industries including steel, glass and ceramics; and assorted lobbies they've engaged. Government-funded research bodies can be found on both sides of the debate!

Theory vs reality
Sparky's view is that the theoretical long-term benefits of zonal pricing are clear enough – a good reason for examining it seriously. However, in the real world where individual decisions are often not made as economists theorise, we would run the risk of significant adverse consequences.

Vital wholesale market liquidity, already thin, might dry up in fragmented regional markets – we wouldn't know until the new system was up and running. Uncertainties would dog the market in the run-up to introduction of zonal pricing, forcing up costs significantly for all of us long before any benefits are felt.

Finally, even the most fervent advocates of zonal pricing concede that cost savings will only trickle down to the "postcode lottery losers" many years hence, and then only in small measure. MPs are likely to hear from those losers a lot sooner than the next election.

Expect more sound and fury on the issue while ministers ponder their decision.

COLUMNISTS
Issue 1648
agri brigade
With Bio-Waste Spreader: "National Farmers' Union (NFU) president Tom Bradshaw has decided to wind down the union's protests about the imposition of 20 percent inheritance tax (IHT) on farmland. Instead, it will concentrate on cautioning the government that its current policies towards agriculture risk undermining UK food production. Why the change of tack? The obvious answer is that the protests simply weren't working…"
medicine balls
With M.D.: "The NHS Counter Fraud Authority (NHS CFA) is examining billing irregularities in the private cataract market, which has grown by 400 percent since 2019, the Sunday Times reports. The NHS pays for 650,000 operations a year. Across England, 131 private clinics have opened since 2019, with costs for the NHS doubling. The Eye has previously reported on concerns that mass outsourcing to the private sector of easier cataract operations could destabilise NHS eye units…"
signal failures
With Dr B Ching: "The stupidity of the government's policy of raising peak intercity fares annually has been exposed in new research from... the government! Since the pandemic, Westminster has controlled the fares of English ex-franchisees, including 'anytime' fares for peak intercity journeys. Labour's 4.6 percent fare rise in March took the full-price Manchester-London return (standard class) to £386, although relentless annual rises have not boosted revenue per passenger mile or per journey…"
eye tv
With Remote Controller: "TV having created the oxymoron of the live funeral, the British model for a papal requiem is a monarch's rites, although with the differences that the successor is unknown and the ceremony has a strong supernatural future tense – the late head of state's acceptance into heaven – that is more discreet in Anglican royal obsequies. Because Benedict XVI resigned nine years before he died, the funeral of Pope Francis marked the first obsequies of an incumbent Pope for 20 years…"
music and musicians
With Lunchtime O'Boulez: "The Performing Right Society, aka PRS for Music, collects royalty payments on behalf of its members, many of them composers with modest incomes. The system works on trust. But members are now saying that trust has broken down – a claim that will be tested in two legal actions being brought by PRS members. One action complains that lower-earning members are being made to subsidise higher earners by paying disproportionately high administration fees…"
in the city
With Slicker: "The Serious Farce Office (SFO) last week relaunched deferred prosecution agreements as its weapon of choice to fight corporate crime – almost 10 years after they were first deployed. Ironically the move came just as the US Department of Justice (DoJ), which initiated this approach, was at Donald Trump's directive retreating from prosecuting foreign bribery cases, where the tactic has been most effective. Deferred prosecution agreements (DPAs) have been a cash cow for the SFO and the Treasury…"
eye world
Letter from Kinshasa
From Our Own Correspondent:
"Taking his cue from Washington and Moscow that authoritarian former presidents can and sometimes do make it back to power – usually madder and more vengeful than ever – our former president Joseph Kabila kicked off a tentative bid to do just that in Goma, in the war-torn east of our troubled land. Goma, along with a large chunk of eastern, less-than-Democratic Republic of the Congo, is in the hands of the M23…"
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