Battle expected to delay launch of competition in electricity industry

John Battle, the energy minister, is next week expected to announce a delay of up to six months to the launch of competition in the domestic electricity market. Michael Harrison reports on the latest setback in plans to liberalise the sector.

Mr Battle is to meet the heads of the 12 regional electricity companies (Recs) and the two Scottish power producers on Thursday to consider a report from PA Consulting, the advisers to Professor Stephen Littlechild, the electricity regulator.

The report is widely expected to conclude that he has no option but to delay the launch of competition because of problems with computer systems and the failure of a large number of Recs to be ready on time.

The original timetable envisaged competition beginning in April in a limited number of areas and then being phased in throughout the country by September.

It is now possible that the none of the country's 23 million electricity consumers will be able to start shopping around for suppliers until September at the earliest. If the system is not ready in April then financial penalties, levied by Professor Littlechild, will come into effect.

An argument has been raging within the industry as to whether the delay should be three or six months. However, all but two of the Recs, Eastern and Seeboard, have told PA Consulting that competition should be delayed until September in order to ensure that the computer systems have been properly tested.

Eastern and Seeboard, along with Yorkshire and Manweb, are the four areas of the country where competition is due to be introduced first. The cities selected are Hull, Chester, Canterbury and Norwich.

But both Manweb, which is owned by Scottish Power and serves Merseyside and North Wales, and Yorkshire, are thought now to have recommended a delay of six months.

One option for Mr Battle and Professor Littlechild is to announce a six- month delay but set a deadline of Christmas for the full phasing-in of competition, so ensuring that all households get a chance to shop around this year.

Those Recs arguing for a delay until September say that even then, it will only give the industry three to four months to test out a computer system that would normally need at least a year to bed down.

They also argue that Professor Littlechild and Mr Battle will be anxious not to have to delay the launch date more than once. "We are all desperate to see competition work but it is not in anybody's interests to go for an earlier date just to be macho," said one executive.

However, John Devaney, chief executive of Eastern, said: "Three months should be the maximum allowed. If you go for six months then you will get people re-inventing the wheel."

A meeting of the Recs took place last Monday to review the position but at that point the final PA report had not been written. It is expected to be completed next Monday or Tuesday.

A six-month delay would infuriate Centrica, the trading arm of British Gas. It has seen its market share steadily eroded as electricity companies enter the liberalised gas market and is eager to strike back by attacking their markets.

Centrica has called for electricity suppliers which are not ready for competition to be prevented from entering the gas market.

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