MPs warn on cost of power shake-up
Friday 21 March 1997
In a damning report, MPs on the Trade and Industry Select Committee also cast serious doubt on whether the costs of introducing competition, a complex process involving the construction of a plethora of new computer networks, could outweigh the benefits. It said the Government should step in to make an independent assessment of the costs involved as a matter of urgency.
Martin O'Neill, the Labour committee chairman, urged the industry to consider a short delay to the timetable set by Professor Littlechild if they could not guarantee an orderly move towards residential choice. The plans envisage competition extending to 25 million households between April and September 1998 in four phases.
"It'll be a damn close thing if it works on time. The problem is that if you give the electricity companies more time to implement competition they will undoubtedly take it," said Mr O'Neill.
Senior industry figures and consumer groups have repeatedly warned that some electricity companies will fail to meet the timetable, blaming lack of co-ordination between the regulator, the Government and the businesses themselves.
The 12 regional electricity companies (RECs) in England and Wales, along with ScottishPower and Scottish Hydro-Electric, have been spending hundreds of millions of pounds on complex computer systems which can track customers as they change supplier.
The report said that the problem of building new metering systems had still not been fully appreciated by the Electricity Pool, the body which runs the wholesale power market.
It said Professor Littlechild should urgently carry out a consultation exercise with the industry and consumer bodies and report on which companies were the most likely to fail to meet the target. One suggestion is that Offer, the regulator's watchdog department, should consider fining companies who do not carry out proper tests of systems in the run-up to next April.
The most damaging charge is that the whole process, which only affects the 6 per cent of household bills, may not be worth it in the first place. Offer estimated it would cost the industry pounds 210m. The report said not one of the companies believed this was realistic, with many experts quoting a figure of pounds 500m.
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