The warnings come at a sensitive moment, as Labour ministers are seeking to negotiate taxpayer-supported deals to enable Port Talbot-based Tata Steel and Scunthorpe-based British Steel to replace loss-making blast furnaces with more modern electric arc furnaces.
Electricity prices in the UK are already much higher than those in Europe.
British companies paid about £66 per megawatt hour for electricity in the second quarter of 2024, compared to £27 per megawatt hour in France and £28 per megawatt hour in Spain, according to an analysis by UK Steel.
TV Narendran, managing director of Tata Steel, has separately warned of high energy costs as well, telling broadcasters earlier this year: “The UK Government has assured us that in the next few years energy costs will come down.”
Previous governments have sought to bring electricity costs down, for example through the British Supercharger scheme which exempts some manufacturers from paying network charges.
But Make UK and Steel UK are concerned that shifting to zonal electricity pricing will undermine these efforts and leave manufacturers who are historically based in high-price areas at a major disadvantage.
The row over zonal pricing has pitted sections of the green energy industry against each other, with energy suppliers including Octopus supportive and wind farm developers and manufacturers opposed.
RenewableUK, which represents the wind industry, has warned Mr Miliband that adopting such major reforms now will inject uncertainty into investment decisions and potentially derail his target to make the power grid “net zero” by 2030.
In the coming weeks, it is understood that Whitehall officials are planning to consult further on the pricing proposals – which are part of the Government’s review of electricity market arrangements (REMA) – including by holding feedback discussions with industry representatives.
Rachel Fletcher, of Octopus Energy Group, said: “The Government currently shields manufacturers from some of the costs of our inefficient energy system.
“With zonal pricing, manufacturers will avoid these costs – in fact, factories in Scotland and the North of England will benefit from some of the cheapest power in Europe.”
On Friday an aide to Mr Miliband said the Energy Secretary’s priorities were “to ensure energy security with our drive for clean power, to protect consumers and industry, and to secure investment into our energy system”.
A government spokesman said: “In an unstable world, the only way to guarantee our energy security and protect consumers from future energy price shocks is by moving towards homegrown power.
“We are reviewing responses to the consultation on reforming electricity markets, ensuring we focus on protecting billpayers.
“And our new industrial strategy will deliver long-term, sustainable growth right across the UK by supporting our industries and driving private investment into our economy.”