Consumers call for power investigation

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The Independent Online
Electricity consumers' groups yesterday called for a full-scale investigation into the operation of the power generation market by the Monopolies and Mergers Commission.

The Chairmen's Group of Electricity Consumers' Committees, which coordinates the work of 14 regional committees, attacked the prices levied by generators and said National Power and PowerGen, the two largest generating companies, should be broken up.

Arguing that the generators were not passing on lower costs to consumers, Ken Prior, the acting chairman of the committees, said: "We believe there's fat in generation... there's no incentive for electricity companies to negotiate hard to get prices down."

He said power generation was "unregulated" and still controlled by National Power and PowerGen, which together account for around 40 per cent of the market. The two have reduced their share after the industry regulator, Professor Stephen Littlechild, threatened them with a referral to the Monopolies Commission.

National Power sold 4,000 megawatts of capacity to Eastern Group, the regional supplier, and PowerGen sold it a further 2,000, giving Eastern 9 per cent of the market.

But Mr Prior said Eastern's acquisition had not made much difference to the price mechanism in the generation market. "We can't see that it is adding to competition," he said.

The Electricity Pool - the wholesale electricity market which sets the price of power on a half-hourly basis - was still far too influenced by National Power and PowerGen. The two companies dominate the "mid-merit" segment of the pool which generally determines the price at which all other generators can then sell their power. Mr Prior said he was disappointed that cheaper gas generators did not have more influence over the pool price mechanism.

The Chairmen's Group said it would be putting its case to Professor Littlechild next month, and they believed that he would be sympathetic. But a spokeswoman for the regulator said that she believed Eastern's purchase of generating capacity had increased competition.

The Consumers' Committees also accused the regional electricity companies of brinkmanship in their approach to the introduction of domestic competition, planned for April 1998. On Monday the Recs said that competition should be phased in over 18 months from April 1998.

Mr Prior said that "four or five" Recs were dragging their feet over competition and attacked the way the process had been organised: "They didn't project manage it, they set up committees," he said.

The electricity companies have been privately critical of the regulator for not taking a lead over the development of competition. Yesterday the Chairman's Group said Professor Littlechild had not done enough to prepare customers for the change. "It's disturbing that Offer has not given detailed consideration to the propaganda campaign," Mr Prior said.