Energy privatisation has been a disaster for Scotland

Energy poverty threatens all of the major goals of the Scottish government

Energy poverty is when you can’t afford to heat your home or cook your food. Almost a third - 31% - of Scots are in this category, That is more than double the rate in England. It is far higher than any EU country - and four times the levels of countries like Scandinavia or Ireland.

The irony is that Scotland is rich in energy resources - Scotland makes 16% of the UK’s electricity - double its population share. Scotland produces a lot of renewable energy - and it could make more from its powerful wind, hydro and tidal resources.

But it doesn’t get the benefit.

If Scotland was added to this table it would be right at the top.

Energy poverty misery will have been exacerbated by the recent cold snap - the gulf in temperature between the south of England and the north of Scotland has been stark.

An important driver of energy poverty is that most of rural Scotland doesn’t have access to the gas network. It costs four times as much to heat your home with electric radiators because of the way that pricing is structured in the UK. For historical reasons the gas tariff to consumers is lower than electricity.

Energy bills in the Western Isles are more than £4,000 a year per household on average.

The UK’s energy regulators resist pressure to equalise pricing and decrease the grid gap.

Some businesses of course are making money:

• Scottish Power posted £1 billion profit in 2024

• SSE posted profits of more than £2 billion in 2024

• OVO which owns Scottish and Southern Energy’s service network posted £1 billion profit in 2024

Not all of that profit is made off the backs of the Scottish people - but a lot of it is.

Energy companies sell power to the UK electricity systems operator at the highest price they can get - that means they never charge less than gas even though it is usually MUCH cheaper to make renewable energy.

When the price of gas is high it pushes up the energy companies’ profits. A lot of the thousands a year that people in the Highlands and Islands pay in their bills ends up as dividends and bonuses for these businesses’ high heid yins and their shareholders - few of whom are based in Scotland.

That money doesn’t end up being invested in the energy infrastructure.

A failed experiment by governments Scotland didn’t vote for

The decision to privatise energy was an ideologically driven experiment by Westminster Conservative governments of the late 20th century that Scotland didn’t vote for.

Only one other European country has done this - Portugal, which now has the highest fuel poverty rate in the EU at 20%.

Thirty years later Scotland is counting the cost.

The theory of privatising utilities like energy and water was that companies would invest in the services, run them efficiently and be happy with a reasonable return on their money. Strong regulation would provide strategy and ensure fairness.

That has not worked.

Private companies don’t have any obligation to consider the interests of the people of Scotland. They operate in an international market. The biggest shareholder of SSE is BlackRock. The biggest shareholder in Scottish Power is the Qatar Investment Authority.

The legal and professional obligations of the leaders of these companies is not to be happy with a reasonable return but to maximise profit.

Regulation has been weak and ineffective. There is a revolving door between these bodies and the private companies - that influences their priorities and outlook.

Senior execs in energy firms lobby shamelessly for things that will maximise their profits - and against those that won’t make them any more cash.

Regulation has failed Scotland’s people.

Standing charges are higher in Scotland - to make it “fair” to people in more densely populated areas

The regulators mandate that it is ‘fair’ that standing charges should be raised on a regional basis because it costs more to distribute energy in areas with a lower population.

The current daily standing charge is 61.97p a day for northern Scotland and 64.17p for southern Scotland. In London and the South East standing charged are 41.57p and 57.84p.

But it would apparently not be “fair” to charge a lower tariff for energy in the areas where it is produced.

The UK’s energy regulation bodies do not see it as their role to address the issues which make bills so much higher in much of Scotland.

It would cost less to distribute power locally to where it is made and if it were charged at a lower tariff, businesses and households would make use of it. Many countries do this.

But in rural Scotland, people who can look out of their windows at power lines, wind turbines and tidal arrays sit shivering because they can’t afford to use any of the power.

Instead of encouraging local businesses and households to make good use of excess energy, the UK prefers to waste it, spending public money on getting wind turbines to turn off when there is no capacity to take power south.

So Scotland produces far more than its fair share of the UK’s energy - and pays far more to access it - who is this fair for?

Scotland is falling behind Nordic countries in energy generation. It was once a world leader in hydro but is no longer .

Whose responsibility is it to ensure that Scotland’s energy infrastructure is fit for purpose?

In a privatised grid, the idea is that energy companies lobby Ofgem for permission to build new infrastructure assets and if Ofgem agrees, they get to recoup the money from billpayers via the regional standing charges.

But Scotland’s standing charges are already so high that it makes it politically difficult to do this - and the asset would then belong not to the people of Scotland but to the private company who can then sweat it.

So the upshot is that there is really no effective mechanism to build the kind of infrastructure Scotland needs and that other countries build as a matter of course - I wrote recently about an area of the Highlands which simply has no access to mains power. Householders there are being asked to pay £1 million to build an asset which would then be owned and controlled by SSE, not the people of Scotland.

Things are very different in countries which own their own power companies - such as Iceland, where the power generator is there to serve the people and even returns its profit to the Treasury each year.

Scotland’s extraordinarily high energy poverty rates threaten all the goals of the Scottish government.

• Rural population: People - even on average incomes - cannot afford to pay these extortionate bills and this drives families away from the Highlands and Islands.

• Child poverty: Much of the money being targeted at low-income families with children will be swallowed by prepayment meters.

• Nutrition: Households impoverished by energy bills struggle to make nutritious meals. They have to turn to cheap high calorie food that doesn’t need cooking.

• The NHS: Almost 40% of pensioners in Scotland are living in fuel poverty - affecting their quality of life, exacerbating heath conditions and impacting the NHS.

• Mental health: It is miserable not being able to heat your home adequately in the winter, it can make it hard to motivate yourself and impact mental health.

• Economic growth: Scottish businesses are paying the highest energy bills in the world - many have been pushed to the wall by exorbitant energy bills.

Poor old Scotland. Energy privatisation is impoverishing the people and destroying businesses. It is not far-fetched to say that people will die because of a policy that Scots never voted for and which the Scottish government can do almost nothing about.