Grid company offers to cut bills: Proposed trade-off if industry accepts supply flexibility

THE National Grid Company has offered to cut industry's electricity bills by up to pounds 150m if companies agree to have supplies reduced or cut off when necessary to help the NGC to meet peaks in demand.

The grid company, which owns and operates the electricity transmission system, would reimburse firms for helping to maintain the security and stability of the electricity system by managing their own demand.

At present National Power and PowerGen help to keep the electricity system stable by having power plants in reserve to meet peaks in demand. They also keep plants on or off the system as required to help maintain the right frequency and voltage.

Last year the NGC paid the generators pounds 310m for this type of service. A spokesman for the grid company said: 'It would be cheaper for us to manage the load which is put on the system than paying the generators.'

He added: 'The generators are not over the moon about this, but competition is competition and they realise that.' However, a spokesman at National Power said: 'We are relaxed about this. It is all part of a general move to help flexible users pay less.'

Similar load-management has long been a feature of the gas industry, in which British Gas offers lower-priced contracts for customers who agree to have supplies interrupted when demand for gas is high.

The NGC said a customer using one megawatt of electricity could be paid pounds 15,000 a year for having supplies temporarily reduced or cut. A large user using 200 megawatts could save about pounds 3m a year.

Offer, the electricity watchdog, said it welcomed any move that helped customers and said it had already suggested a similar system. The regulator and the Government have been lobbied about prices by large energy users including ICI and Blue Circle, which say electricity bills have soared since the industry was privatised. Some companies say bills now are 20 per cent higher than a year ago.

Peter Rost, chairman of the Major Energy Users Council, said he welcomed the NGC proposals as a 'modest' contribution to the debate. He said there remained a fundamental flaw in the structure of the electricity industry, which is that National Power and PowerGen have such a large influence on the prices in the electricity trading pool.