Ofgem boss calls for truce in row over electricity market overhaul

The head of Britain’s energy regulator has called for an industry truce in the deepening row over plans to overhaul the electricity market.

A decision on whether to replace the country’s single electricity market with several market zones, each with their own price, is expected within weeks.

It could mean that homes in areas where there is an abundance of electricity generation will pay lower prices than those in areas of high demand and low generation capacity.

But as the decision – to be taken by the energy secretary, Ed Miliband – approaches, energy organisations have ratcheted up their opposing campaigns in what sources have described as one of the energy industry’s “ugliest” drives in years to pile pressure on the government.

The campaigns have included contradictory paid-for research by third-party consultants, opinion surveys and coordinated open letters to government departments in the hopes of swaying the debate.

The row, which has been particularly lively on social media, prompted a rare intervention by Ofgem’s chief executive this week against “lobbying on polarised positions”. Instead, Jonathan Brearley urged companies to hold “an honest conversation” about the plans.

The proposals have been divisive in the industry, with those in favour of the change – including Octopus Energy, the UK’s biggest home energy supplier – arguing a series of zonal markets could create a more efficient energy system with less waste and lower bills.

Those opposed – which include some of the biggest renewable energy developers – fear that a radical upending of the market risks undermining green energy investment at a crucial juncture for the government’s clean energy investment ambitions, which could ultimately wipe out potential savings on bills.

Energy companies are planning to spend more than £70bn by the end of the decade to rewire Britain as part of the shift to clean energy, and as more households switch to electric cars and heat pumps.

“This has been the most bruising debate to play out in the energy industry in the last 15 years,” an industry source told the Guardian late last year. “I’ve fallen out with people; there have been some very nasty arguments.”

Brearley told an industry conference: “I recognise there are a lot of divided views about the way forward. There are clear benefits of a zonal system, but equally there are risks that any change undermines investment and drives up costs.”

“We need to balance system efficiency, with the lowest cost of investment, and the needs of the customers we serve.”

The call for calm came after Brearley raised eyebrows in the industry earlier this year by coming out in favour of zonal energy pricing. He later said his views were personal, rather than that of the organisation.

“I have my preference, but thankfully this decision that will be made by the secretary of state,” Brearley said. “And, ultimately, when the secretary of state decides, let’s get behind that and deliver for customers.”