Plaid Cymru warns electricity pricing reforms could increase bills in Wales

Plaid Cymru has warned that UK Government reforms to the energy pricing system could see bills increase for households in parts of Wales.

Plaid’s Energy spokesperson, Llinos Medi MP, has written to the Secretary of State for Energy Security and Net Zero, Ed Miliband MP, to express concerns over the Review of Electricity Market Arrangements and its potential shift towards a zonal pricing system.

Ministers are considering major changes to the UK’s energy pricing system as it seeks to decarbonise the electricity grid by 2030. It is exploring two options: reforming the current UK-wide pricing system or introducing a new approach known as “zonal” pricing.

This would divide the UK into between seven and 12 zones, each with different wholesale prices based on their local energy mix.

Zonal model

Reports suggest that, if the Government follows a zonal modal, Wales would be split into multiple pricing zones, grouped with areas in England.

Given the relatively lower energy demand in parts of Wales, this could lead to higher energy prices for Welsh consumers due to high demand in major English cities, rather than achieving the intended cost reductions in high-generation areas, as seen elsewhere such as northern Scotland.

Ms Medi warns that unless Wales is treated as a single energy zone, these changes could result in increased energy costs for Welsh households – despite Wales being a net exporter of electricity.

In her letter, The Ynys Môn MP Llinos Medi notes that while Wales produces a significant share of the UK’s electricity, it also suffers from high fuel poverty, affecting 45% of households. She says the proposed shift to zonal pricing presents an opportunity to address this inequality by ensuring that energy prices reflect local generation levels.

Clarity

The letter calls for clarity on key aspects of the proposed pricing model and seeks answers to the following questions:

When will the Government conclude its Review of Electricity Market Arrangements and announce its decision on zonal pricing?

What assessment has the Government made of the potential impact of a multi-zone model on fuel poverty and living standards in Wales?

Will the Government consider a single Welsh zone in its modelling for the proposed zonal pricing system?

Ms Medi MP said: “Wales is in a unique position as an energy-rich nation that pays disproportionately high costs for energy. The UK Government’s review presents an opportunity to make energy pricing fairer, but I am deeply concerned that a multi-zone model could have the opposite effect, driving up bills for communities like mine in Ynys Môn.

“The UK Government must ensure that any changes to the electricity market benefit communities in areas that generate high volumes of energy, rather than disadvantage them. If the Secretary of State chooses to pursue a zonal model, Wales must be treated as one energy zone.”

Two consultations have been held to consider options for electricity market reform across the UK, the most recent of which concluded last December. The UK The government says it will will use the responses from this second consultation and evidence submitted to inform further policy development and aims to conclude policy development by around mid-2025 before moving into implementation of final decision making.