23rd August 2026
It seems energy prices get more complicated all the time so we take look a the latest issue addressed by the Scottish Government.
There is a very simple question behind a surprisingly complicated Scottish Government energy policy.
If the Government helps some of Scotland's biggest energy users by reducing the charges they pay for electricity, who pays the money they no longer have to pay?
It is an important question because households and small businesses are already dealing with high energy costs, while another change to the energy price cap is due in October.
The latest Scottish Government consultation on the British Industrial Competitiveness Scheme, or BICS, does not make the situation particularly easy to understand.
In fact, it may leave the average electricity customer wondering whether the Government is moving money around rather than actually reducing the underlying cost of electricity.
What is BICS?
The basic idea is straightforward.
Some industries use enormous amounts of electricity. Their electricity bills can be a major factor in deciding whether it is cheaper to manufacture something in Britain or somewhere else.
The British Industrial Competitiveness Scheme is intended to help these energy-intensive businesses compete internationally.
Under the proposed arrangements, eligible businesses can receive relief from certain electricity-related costs, including their share of the Renewables Obligation.
The argument for doing this is easy to understand.
If a Scottish manufacturer is paying considerably more for electricity than a competitor elsewhere in Europe, the Scottish company may eventually lose orders, reduce production or close.
Helping that company reduce its electricity costs could therefore protect jobs and investment.
That is the case for BICS.
But there is another side to the argument.
The money does not simply disappear
Electricity charges pay for real things.
If one customer is relieved of part of a charge, that cost has to be dealt with somewhere else unless the Government provides money from taxation or another source.
The Scottish Government actually acknowledges this.
Its consultation response says that exempting eligible businesses has a redistributive effect. In other words, the cost burden changes between different groups of electricity users.
That could include businesses which do not qualify for the scheme.
It could also affect domestic consumers.
The Government says, however, that households and other non-eligible consumers will not see their electricity bills increased as a result of BICS because the additional costs will be offset through other changes and Exchequer funding.
That is an important distinction.
The Government is not saying that the cost disappears.
It is saying that the cost will be dealt with elsewhere so that it does not result in an additional charge appearing on household electricity bills.
Ultimately, if taxpayers' money is used to cover part of the cost, the bill has moved from the electricity system to government finances.
And government finances come from taxpayers.
The consultation raises another question
This is where the numbers become particularly interesting.
Only nine valid responses were received to the Scottish Government consultation.
Six supported the proposed exemption, two opposed it and one neither agreed nor disagreed.
That produces a headline figure of 67% support.
But it would be misleading to suggest that this demonstrates overwhelming support across Scottish industry.
The Scottish Government itself warns that the results are not necessarily representative of wider stakeholder opinion.
There is an even more interesting detail.
Of the five respondents who provided written comments, all five raised concerns about the proposed exemption.
So the consultation does not really provide a simple story of Scottish businesses saying, "Yes, give industry cheaper electricity."
It shows a much more complicated picture.
The timing is awkward for consumers
This is happening at exactly the time when household energy costs remain a major concern.
Ofgem increased the energy price cap by 13% from July. For a typical household paying by Direct Debit, the annualised cap rose to £1,862.
That does not mean every household pays £1,862. The price cap limits the rates suppliers can charge, while the actual bill depends on how much energy a household uses.
And another price-cap decision is approaching in October.
That means consumers are already having to deal with rising energy costs while the Government is simultaneously changing the way different parts of the electricity system are charged.
For ordinary consumers, it can become almost impossible to work out why their electricity costs what it does.
There is the wholesale cost of electricity.
There are network costs.
There are environmental and renewable-energy charges.
There are supplier costs.
There are government schemes.
There are taxes.
And there are now increasingly complicated arrangements designed to reduce costs for particular groups of businesses.
The average household does not need to understand every component of the electricity market.
But it does deserve to understand who is paying for what.
Is helping industry wrong?
Not necessarily.
In fact, there is a strong economic argument for doing it.
If a large Scottish industrial plant closes because its electricity costs are uncompetitive, the consequences can extend far beyond the electricity bill.
Jobs disappear.
Local suppliers lose customers.
Business rates and other economic activity can decline.
The Government may then have to spend money supporting the workers and the local economy.
Keeping productive industry operating can therefore be considerably cheaper than allowing it to disappear.
This is particularly important in Scotland, where industrial businesses can be major employers in areas outside the central belt.
But there is a difference between saying that industrial support is justified and saying that the cost of that support does not matter.
It does.
The question taxpayers should ask
The real test of BICS will therefore not be whether eligible companies receive cheaper electricity.
They probably will.
The more important question is whether the economic benefits justify the cost of providing that relief.
How many jobs will it protect?
How much investment will it attract?
How many businesses would genuinely be at risk without the support?
How much will each job effectively cost?
And how much will ultimately be paid by the Government rather than electricity customers?
Those are the figures that will tell us whether this is an effective industrial policy or simply another complicated way of moving costs around.
Energy bills are becoming harder to understand
There is perhaps a bigger issue here.
Consumers are repeatedly being told that particular measures will protect them from higher energy costs.
At the same time, their bills can still rise because of wholesale prices, network charges, inflation and changes to the price-cap calculation.
Now we have another layer of policy designed to make electricity cheaper for selected industrial users.
None of these policies necessarily contradict one another.
But put them together and the system becomes extremely difficult for an ordinary customer to understand.
That matters because complexity can hide the real cost.
If industry receives a reduction, households quite reasonably want to know whether they are paying for it.
If the Government says they are not, then it should be possible to show clearly where the money comes from instead.
And if taxpayers are funding the difference, that should be explained just as clearly.
The October question
The price cap rose by 13% in July, taking the typical annual cap to £1,862, and Ofgem reviews the cap every three months.
Ofgem has not yet published the final energy price cap for October to December 2026, so it would be premature to claim exactly what households will pay.
But the next review is coming at a time when energy costs are already causing concern.
That makes the Government's wider approach to electricity charges worth watching.
For households, the important point is very simple.
A cheaper electricity bill for one group does not automatically mean that electricity itself has become cheaper.
Sometimes the cost has genuinely been reduced.
Sometimes it has been transferred to another customer.
Sometimes the taxpayer picks it up.
And sometimes several changes happen at once, making it difficult to see what is really happening.
That is why the forthcoming detailed impact assessment of the industrial competitiveness scheme will be much more revealing than a consultation in which only nine organisations responded.
Helping Scottish industry to remain competitive is a worthwhile objective.
But consumers should also be able to ask a very reasonable question:
If industry gets a cheaper electricity bill, who ultimately pays the difference?
If you have the interest and or the stamina the Scottish Government response is at https://www.gov.scot/publications/scottish-government-response-british-industrial-competitiveness-scheme-consultation-regulatory-changes-scheme-delivery/