Citizens Advice response to BEIS Hydro Benefit Replacement Scheme and Common Tariff Obligation consultation
Citizens Advice welcomes the opportunity to respond to this consultation as part of its statutory role to represent domestic and small business energy consumers in Great Britain (GB). Our response is not confidential and may be freely published.
In general, we support the retention of the Hydro Benefit Replacement Scheme (HBRS) and the Common Tariff Obligation (CTO) in protecting consumers in the North of Scotland from the higher costs of electricity distribution in that region and from having differentially higher electricity tariffs. The HBRS and CTO are well-established and understood schemes and therefore likely to be administratively efficient. We do have some ongoing concerns regarding the regressive nature of the levy used to provide the HBRS subsidy and regarding the uncertainty in the level of future distribution costs which may either increase the subsidy or negate its necessity. These aspects are explained further below within the detailed answers to the consultation response.
We also support the extension of the use of the HBRS in subsidising Shetland consumers from high distribution costs. The HBRS mechanism provides a familiar mechanism to cross-subsidise Shetland consumers although the concerns with the HBRS as noted for the wider North of Scotland subsidy remain.
There is an opportunity to revisit the HBRS and CTO schemes in due course as part of wider government energy policy reviews looking at the decarbonisation agenda. For instance, we think it would be valuable for the proposed Citizens’ Assembly considering how to achieve the UK net zero carbon emissions’ target to also review these cross-subsidy schemes to ensure fairness in application.