National Grid calls for pricing changes

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The Independent Online
THE NATIONAL Grid Company, which runs the nation's electricity transmission network, has called for changes in the charging methods used by National Power and PowerGen.

If accepted, the proposals would reduce the volatility that has characterised prices in the electricity trading pool over the past two years and could mean lower electricity bills.

Under the current system, the two generators may charge high prices for the use of plant to ensure stability in the electricity supply. The plants are sometimes needed when other plants fail to generate or because of unexpected surges in demand.

The price for keeping the plants running is paid by the regional electricity companies and passed through to consumers.

According to the NGC, these charges cost consumers pounds 475m in 1992 compared with pounds 268m the previous year. The regional supply companies have complained that the unpredictability in these extra charges makes it harder to set consumer tariffs.

The same volatility has previously prompted the industry watchdog, Offer, to carry out a review of prices in the electricity pool.

The NGC wants to take over responsibility for almost all the special charges on behalf of the regional electricity companies in return for an agreed fee. And it wants to agree set prices in contracts with National Power and PowerGen for running plants needed for security of supply.

The NGC said that it would then have an incentive to reduce demand for those plants by spending more on upgrading the system. It would also ask large customers to manage their electricity consumption at times of unexpected demand, again in exchange for a fee.

The NGC said that it had been discussing the plans with Offer for some months and will present its final proposals at a meeting next week.