British consumers to pay the price for Enron failure

The collapse of energy trading giant Enron has starved the UK electricity market of vital liquidity and could mean higher prices for consumers.

For more than a year, UK electricity has been traded through a computerised system called Neta – a platform that was the brainchild of the energy regulator Ofgem and was aimed at lowering wholesale prices.

Before its collapse, Enron was an active player in the market, and a key provider of liquidity. With Enron gone, Neta's liquidity is rapidly drying up as companies that both produce and distribute electricity realise they can trade with themselves.

According to Colin Cooper, a trading risk analyst at Cap Gemini Ernst & Young, the UK power market is now seriously lacking in many of the critical requirements for creating a properly functioning market, and the consumers will be the ultimate victims. "Neta has laid the foundations for creating real competition in wholesale markets, but liquid trading has not developed," he said.

Neta has already faced criticism from industry watchdogs for failing to pass on savings from the falling wholesale market to customers. A recent study by Energywatch indicated that while wholesale prices have fallen by 18 per cent since the opening of Neta, customers have only felt 2.5 per cent falls in prices.

By taking liquidity away, the Enron collapse is expected to further constrict wholesale prices and could see the advantages to customers wiped out or turned into price hikes.

Neta has also historically come under fire from energy minister Brian Wilson, who argues that it does little to promote providers of alternative energy.