Electricity watchdog to rule on 'dash for gas'

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The Independent Online
THE ELECTRICITY industry is braced this week for a ruling from its regulator, Offer, on the 'dash for gas' for electricity generation. Regional electricity companies could be penalised if Offer decides that they have been uneconomic in signing contracts for electricity from gas plants rather than from coal.

Most of the regional companies have stakes in the gas-fired projects and have 15-year contracts to buy the electricity they generate. Critics of the industry call this 'dash for gas' uneconomic, blaming it for the planned decline of British Coal with the loss of more than 30,000 jobs. But regional companies have rejected allegations that the gas-fired plants will provide power at a higher cost.

City analysts expect that this Thursday's report from Professor Stephen Littlechild, the director- general of Offer, will exonerate the regional electricity supply companies. However a further study will not be completed until next spring.

Professor Littlechild is also expected to say that he intends to limit the ability of the companies to pass costs related to generation on to domestic and other small customers. The companies have a monopoly over most of their customers until 1994 and over domestic consumers and many small businesses until 1998.

There is growing concern that if the supply companies do not buy their electricity judiciously, consumers will be forced to bear the consequences.

The regulator is likely to limit the companies' ability to pass costs on by indexing them to a yardstick. This will probably be an average of all the companies' costs, which would penalise the least efficient. The other yardstick under consideration is indexation of pass-through to fuel prices in the open market.