Dispute dims power's big day

News Analysis: As the gas and electricity market opens, consumer bodies are balking at costs from electricity suppliers

THE OPENING yesterday of Britain's domestic gas and electricity markets to full competition was marred by a dispute between suppliers and consumers over the cost of the pounds 1bn exercise.

Electricity companies are pressing the Government to be allowed to pass on their full costs to customers, which would result in an extra pounds 270m being added to household bills next year.

However, consumer bodies are arguing that the pounds 726m which the energy regulator, Callum McCarthy, has allowed the industry to pass on is already excessive.

Yvonne Constance, chairwoman of the Electricity Consumers Committee for London, said: "The amount involved is outrageous, exorbitant, and far too high. We consumers are very unsympathetic about the extra costs the industry is facing."

Costs have risen mainly because electricity suppliers did not have their computer systems ready in time, resulting in the liberalisation timetable being delayed by more than a year. This in turn has resulted in the 14 regional electricity suppliers being fined pounds 45m by the regulator.

Despite the escalating costs, the modest number of electricity customers who have so far switched supplier and the fact that poorer consumers have done least well out of liberalisation, the Government maintains the exercise has been a success. John Battle, the energy minister, likened the complexity of the exercise to "sending a rocket to the moon" and insisted that the scale of the achievement should not be underestimated.

So far, 4.5 million gas customers - just over 20 per cent of the market - and 1.5 million electricity consumers - 6 per cent of households, have switched supplier.

The gas market has been open to competition longer and the savings are bigger - an average of pounds 78 on the typical pounds 350 annual gas bill. In contrast, the average savings that can be made by switching electricity supplier are equivalent to pounds 40 off a pounds 275 bill.

Even though all gas and electricity customers are offering "dual fuel" deals which offer consumers a similar discount, 100,000 electricity consumers are switching supplier each week.

The biggest benefit is being felt by Centrica, the trading and supply arm of the former British Gas. Roy Gardner, its chief executive, said that Centrica was signing up 30,000 electricity customers a week - twice the number of gas customers it is losing.

The industry and the Government has so far largely ducked the question of what to do with the "fuel poor" who have benefited least from competition. Of Britain's 26 million households, some 4.5 million have a pre-payment meter for either gas or electricity.

Ministers and regulators alike are keen to see more of these households switching to payment by credit, in which case they would reap the benefit of cheaper prices.

But they are loathe to set the industry mandatory targets and, although pre-payment customers are more expensive to service, suppliers themselves are reluctant to encourage more to switch to different payment methods because of fears of an explosion in bad debts and disconnections.

The consensus across the industry is that the liberalisation of the gas and electricity markets will mean the emergence of a handful of powerful suppliers. At least four electricity supply businesses - those owned by Swalec, Norweb, Seeboard and SWEB - are up for sale and National Power has recently bought Midland Electricity's supply arm.

Mr Battle said he had "an open mind" about mergers between supply companies, while Mr McCarthy said: "I expect that over the next 18 months I will be advising the Secretary of State on a lot of merger proposals."

The bigger question is whether the rest of Europe agrees to follow where Britain has led. Although Continental energy markets were theoretically liberalised this February with agreement to throw open one-third of the market to competition within six years, progress has been painfully slow.

The French have not yet adopted the relevant EU directive into their own legislation and will not do so until the autumn at the earliest. In Germany, meanwhile, only three domestic electricity consumers have switched supplier and one of those was a Green Party MP who was making a political point.

In Norway, consumers actually have to pay a charge to switch supplier while in Benelux, new suppliers are dissuaded from entering the market by high charges levied by incumbent suppliers to use the distribution network.

There are also physical bottlenecks which prevent British companies supplying customers on the Continent. The cross-Channel interconnector between Britain and France has only 2,000 megawatts of capacity, most of which is contracted by Electricite de France, while there is virtually no interconnector between France and Spain.

As Mr Battle put it yesterday: "Defending traditional interests seems to be causing something of a blockage." He suggested that if European governments could be persuaded to see their electricity consumers more as voters then the process might be speeded up. Meanwhile Britain, once again, remains the odd man out in Europe.

Arts and Entertainment
'A voice untroubled by time': Kate Bush
musicReview: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Life and Style
Cooked up: reducing dietary animal fat might not be as healthy as government advice has led millions of people to believe
healthA look at how governments started advising incorrectly on diets
News
peopleJustin Bieber accuses papparrazzi of acting 'recklessly' after car crash
Life and Style
tech
PROMOTED VIDEO
News
people
Voices
voices
Sport
Roger Federer is greeted by Michael Jordan following his victory over Marinko Matosevic
tennisRoger Federer gets Michael Jordan's applause following tweener shot in win over Marinko Matosevic
Arts and Entertainment
Oppressive atmosphere: the cast of 'Tyrant'
tvIntroducing Tyrant, one of the most hotly anticipated dramas of the year
News
i100
News
Ukrainian Leonid Stadnik, 37, 2.59 meter (8,5 feet) tall, the world's tallest living man, waves as he poses for the media by the Chevrolet Tacuma car presented to him by President of Ukraine Viktor Yushchenko in Kiev on March 24, 2008.
newsPeasant farmer towered at almost 8'5'' - but shunned the limelight
News
Walter Matthau and Jack Lemmon in ‘The Front Page’, using an old tech typewriter
media
Life and Style
Could a robot sheepdog find itself working at Skipton Auction Mart?
techModel would allow robots to be programmed to control crowds and save people from burning buildings
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100
Arts and Entertainment
Suha Arraf’s film ‘Villa Touma’ (left) is set in Ramallah and all the actresses are Palestinian
film
Sport
Angel Di Maria poses with Louis van Gaal after signing for Manchester United
sportWinger arrives from Real Madrid and could make debut on Saturday
Arts and Entertainment
Kingston Road in Stockton is being filmed for the second series of Benefits Street
arts + entsFilming for Channel 4 has begun despite local complaints
Arts and Entertainment
Hooked on classical: cellist Rachael Lander began drinking to combat panic attacks
musicThe cellist Rachael Lander’s career was almost destroyed by alcohol she drank to fight stage fright. Now she’s playing with Elbow...
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

Senior C# Developer (.NET, C#, JMS, TDD, Web API, MVC, integrat

£45000 - £75000 per annum + benefits+bonus+package: Harrington Starr: Senior C...

GUI Developer (GUI,C#,.NET,VB6)

Negotiable: Harrington Starr: GUI Developer (GUI,C#,.NET,VB6)SurreyCompetitive...

Junior Database Administrator (SQL, T-SQL, Excel, SSRS, Crystal

£30000 per annum + benefits+bonus+package: Harrington Starr: Junior Database A...

Day In a Page

Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
Rachael Lander interview: From strung out to playing strings

From strung out to playing strings

Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
The science of saturated fat: A big fat surprise about nutrition?

A big fat surprise about nutrition?

The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
Emmys 2014 review: Can they genuinely compete with the Oscars

Can they genuinely compete with the Oscars?

The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
On the road to nowhere: A Routemaster trip to remember

On the road to nowhere

A Routemaster trip to remember
Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

Hotel India

Mumbai's Taj Mahal Palace leaves its darker days behind
10 best pencil cases

Back to school: 10 best pencil cases

Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

Arsenal know battle with Besiktas is a season-defining fixture

Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

Pete Jenson: A Different League

Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
This guitar riff has been voted greatest of all time

The Greatest Guitar Riff of all time

Whole Lotta Votes from Radio 2 listeners
Britain’s superstar ballerina

Britain’s superstar ballerina

Alicia Markova danced... every night of the week and twice on Saturdays
Berlin's Furrie invasion

Berlin's Furrie invasion

2000 fans attended Eurofeurence
‘It was a tidal wave of terror’

‘It was a tidal wave of terror’

Driven to the edge by postpartum psychosis