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Energy boss attacks PM's low-tariff pledge

SCOTTISHPOWER'S chief corporate officer Keith Anderson has cast doubt on whether Government plans to put people on the lowest energy tariff are workable, warning that legislation would be difficult and complicated to devise.

WARNING: ScottishPower's Keith Anderson says new government policy on prices is potentially unworkable.
WARNING: ScottishPower's Keith Anderson says new government policy on prices is potentially unworkable.

His comments put the company, owned by Spanish utility giant Iberdrola, at odds with Prime Minister David Cameron, who has championed forcing firms to only offer the cheapest tariffs, following recent controversy about hikes in energy prices amid huge profits.

Mr Anderson's views also expose divisions within the energy industry, with rival E.ON vowing it would make the government policy work.

"It is not as simple and straightforward as 'we can just put people on the cheapest tariff'," Mr Anderson told the Energy Bill Committee at Westminster. "I am not too sure how we get worded into legislation 'the cheapest tariff for that individual'."

He cautioned that some people are unable to access online tariffs while others prefer higher standing charges to receive lower usage fees and it would be hard to determine what their cheapest tariff would be. He added it was very difficult to offer such a tariff to those on pre-payment meters.

"At its highest level it sounds perfectly sensible and laudable to say 'let's put everybody on the cheapest tariff'. But you start to look at the detail of that and it becomes very complicated," Mr Anderson insisted. He also said to legislate for such a policy would be "incredibly difficult and incredibly complicated".

He warned that some commentators predict the move could lead to less competition and called for the inclusion of a sunset clause (which forces MPs to reconsider the law in a few years' time) in legislation so that its impact on the market can be reviewed.

Sara Vaughan, director of strategy and regulation of E.ON UK, said she understood that under the policy, customers on fixed tariffs, which attract a premium for avoiding rises, would be put on the cheapest fixed tariff and customers on variable rates on the equivalent.

However, Mr Anderson queried whether customers could be put on to a fixed tariff without signing paperwork.

Ms Vaughan said: "I don't disagree it is complicated but we have a will to make it work."

Mr Anderson also warned MPs that key parts of the Government's planned reforms must be unveiled before the summer, to give some certainty to energy firms' investment decisions.

One element of this is the strike price to be used in new contracts for difference, that will replace the renewable obligation regime. If the electricity price falls below the strike price, generators will be compensated, if it goes above the difference will be returned.

Mr Anderson said: "If there is a delay in the bill, if there is a delay in us seeing the detail of the strike price, we will start getting concerned about the ending of the renewable obligation because it will start affecting investment decisions."

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