London power prices cut: Charges to be lowest for three years Impact of VAT reduced

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The Independent Online
LONDON Electricity will cut prices for domestic customers by 3.3 per cent from 1 April and by 4.4 per cent for those paying by direct debit or pay-as-you-use meters. A price freeze will also be introduced from 1 April by East Midlands Electricity and by Southern Electric.

Similar moves have been announced since December by most of the regional electricity supply companies in England and Wales. Most of the companies have also been offering rebates and price improvements over the past year.

London Electricty said that price changes introduced since April 1993 saved the average residential customer pounds 27 over two years and that charges would now be at their lowest level for three years. East Midlands said that the average electricity bill had gone down from pounds 296 in 1992/3 to pounds 287 in 1994/5. Southern puts the real savings per household in its region at pounds 40 over the two years to April 1995.

Henry Casley, the chief executive of Southern Electric, said the price freeze, taken with earlier reductions and a winter rebate, would help to offset the introduction next month of VAT on domestic fuel.

Analysts say that the freeze or reductions in price are to be expected and in many cases reflect over- charging last year. If the companies wrongly predict inflation when they set prices for a year they must subsequently make an adjustment.

The price reductions may also reflect a sharp drop last year in the cost of coal bought by National Power and PowerGen. Under the regulatory regime, the benefit of falling coal prices must be passed through to consumers.

The companies are also keen to curry favour with Offer, the regulator. Professor Stephen Littlechild, the director-general of electricity supply, is reviewing the formula controlling electricity distribution charges, which account for the bulk of the regional companies' profits. He is due by the summer to decide what he believes the new price controls should be.