Electricity trading pool ruling dismays big firms

OFFER, the electricity regulator, has rejected calls from large energy users to be allowed to buy and sell electricity outside the industry's trading pool, writes Mary Fagan.

Tim Eggar, the Energy Minister, had asked Offer to look at the potential for trading outside the pool, which large electricity users hoped would mean cheaper power.

Almost all electricity is traded through the pool system at present, although generators and their customers often have contracts to hedge against volatility in the pool price. Professor Stephen Littlechild, director-general of Offer, said that trading outside the pool might benefit those involved but would make the market less transparent and more complex.

His decision disappointed some large industrial users including chemical, steel and cement firms, which claim that British energy prices put them at a disadvantage to their rivals overseas. They had hoped to bypass extra costs associated with the pool, including the levy which raises about pounds 1bn a year for nuclear power.

Professor Littlechild has also ruled out changes that would enable generators to be paid the price they quote for electricity from each of their power plants rather than a common price as at present.

Professor Littlechild said that changing the system to award the actual bid price would be difficult and could lead to higher prices in the long term.