Gas gaffe could cost generator pounds 500,000

National Power may be forced to pay an extra pounds 500,000 for natural gas the company bought in error over the weekend.

Trading on the flexibility market on Sunday, National Power bought gas from British Gas' TransCo at 10.60p per kiloWatt hour (kWh), instead of 10.60p a therm.

As a result, it committed itself to paying pounds 530,000 for gas worth pounds 30,000, according to a National Power spokesman. The company said that because the purchase resulted from a genuine clerical error, "we don't expect to pay the offer price".

But this has provoked a storm among shippers who feel that users of the flexibility market are contractually obliged to honour their trades. One company said yesterday: "We expect National Power to pay the money. We would challenge it in law if National Power was let off."

The blunder also caused one City wag to point out that at least it was a start in reducing British Gas's pounds 40bn liabilities. British Gas has been left with gargantuan liabilities having contracted to buy North Sea gas at a historical price considerably above current prices.

Both TransCo and National Power, the two parties to the botched deal, said that industry regulator Ofgas had been made aware of the problem. But Ofgas, while acknowledging that it has been informed, says it is unable to get involved.

"It's really a contractual matter between them", an Ofgas spokesman said. "We haven't got the power to get involved."