He fears that the price rise, which could happen virtually overnight, will be politically unacceptable and the electricity market will continue to be managed indefinitely.
Professor Stephen Littlechild, director-general of electricity supply, has ordered National Power and PowerGen to reduce prices in the electricity pool by about 7 per cent for the next two years from an October 1993 base. But Mr Baker said that a return in 1996 to market forces could force an unpalatable step change. He believes that the action of the regulator may be 'digging a pit' for the industry.
Professor Littlechild imposed the cap because he is concerned at the ability of National Power and PowerGen to influence prices in the trading pool through their dominant position in the market place. He hopes that by the spring of 1996 competition in electricity generation will mean market domination is no longer an issue. To help competition he has demanded that the two generators sell off the equivalent of six large power plants.
He said his price cap would save customers pounds 500m over the two years. But it has already brought an angry response from the state- owned Nuclear Electric, which believes it will bear half the cost.
Unlike National Power and PowerGen, Nuclear Electric sells largely through the pool rather than through contracts with its customers. The company has accused the regulator of discrimination and of 'collusion' with National Power and PowerGen.Reuse content