Bosses to pay for power cut fiasco

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The Independent Online

National Grid Transco's directors may be forced to surrender their executive bonuses as the company faces a potential fine of up to £400m because of Thursday's power failure in London.

The energy regulator, Ofgem, has launched an investigation into the causes of the half-hour blackout that crippled much of central and south London during the evening rush hour.

NGT's chief executive, Roger Urwin, admitted: "All our directors have an amount of their pay that is dependent on the performance of our networks. That will clearly depend on the investigation and what was at fault."

Mr Urwin received a £300,000 bonus last year on top of his base salary of £600,000, giving him a total take-home package, including other benefits, of £924,000. The company's eight executive directors together received bonuses totalling £1.4m.

Mr Urwin said that in principle "all and any bonus" was at risk.

The pay-outs will depend on the results of the Ofgem probe, which will be passed to the energy minister, Stephen Timms, later this year.

Callum McCarthy, the chief executive of Ofgem, said: "In the light of ... our own investigation we will consider if [NGT] carried out its legal obligations to maintain the grid to the required standard."

If Ofgem finds that NGT was negligent, it has the power to fine the company up to 10 per cent of its UK turnover. As NGT generates £4bn a year, the blackout could lead to the largest-ever fine demanded by a UK regulator.

NGT could also have financial penalties imposed as part of its next five-yearly regulatory review, which begins in 2006, a spokesman for Ofgem said.

NGT is also caught up in the investigation into the blackouts that crippled New York earlier this month. The company owns an electricity distribution company, Niagara Mohawk, which was initially accused of causing some of the power cuts. However, indications now are that NGT will escape much of the blame.

In London, Mayor Ken Livingstone said that underinvestment and deregulation were to blame for the cuts.

But NGT said that "freak coincidence" caused what was the worst UK blackout for more than a decade. Early indications are that the blackouts were triggered by two separate faults. Mr Urwin said that he was "extremely proud of NGT's record" and described the blackout as a "blemish".

On average 300-400MWh of power is lost every year through faults in the transmission system. On Thursday, 480MWh was lost in one incident.

Mr Urwin said the company had invested £3.5bn in the transmission network since 1990. This is more than double the amount spent by the old Central Electricity Generating Board.

The blackouts crippled the London Underground, which recently closed its own power generators.

But arguably the biggest loser was Network Rail. Problems with power and signaling affected 15,000 trains and led to 40,000 minutes of delay - more than its total allowance for a whole year.

The delays would cost the company around £5m in compensation payments to train operators, a spokesman for Network Rail said. The companies affected were: Go-Ahead, which operates South Central and Thameslink; Stagecoach, which operates South West Trains; and Connex, which runs Connex South East.

Under Network Rail's licence, it can't make a claim against NGT for the power loss, because there wasn't any damage to the rail infrastructure.

The company was considering claiming the £5m from its own insurance, a Network rail spokesman said.