Ofgem delays launch of trading system

The energy regulator, Callum McCarthy, confirmed yesterday that the launch of an electricity trading system, designed to bring UK power prices down by 10 per cent, could be delayed until next year.

The energy regulator, Callum McCarthy, confirmed yesterday that the launch of an electricity trading system, designed to bring UK power prices down by 10 per cent, could be delayed until next year.

The delay is an embarrassment to both Ofgem and the Secretary of State for Trade and Industry, Stephen Byers, who have consistently maintained that the system would go live on 21 November as planned, despite the misgivings of industry.

Ofgem said that testing of the computer links between its central systems and participants in the electricity trading market would be delayed by two weeks. This will have a knock-on effect on end-to-end testing and could hold up the introduction of the New Electricity Trading Arrangements, or NETA as they are known, until the New Year. Ofgem has ruled out launching the system over the Christmas period.

An Ofgem spokesman refused to say when NETA might now be ready to go live. "This is a huge enterprise and there are so many players involved that it is difficult to predict anything at the moment," he said.

The system has been in development for three years. The cost to Ofgem and Logica, which is providing the core of the system, is £90m but electricity generators and suppliers are spending tens of millions more to develop their own systems and make them compatible.

The new trading arrangements will replace the existing Electricity Pool, whereby generators bid a day in advance to supply electricity in half-hourly slots. The pool price is determined by the price at which the last bit of generating capacity is bid into the system.

Big generating companies such as National Power and PowerGen, say they are ready to launch NETA on time. But the problems lie in ensuring that the system functions properly end to end.

Wholesale electricity prices have already begun to come down in anticipation of the launch of NETA. Only last week PowerGen was forced to issue a profit warning, saying that the fall in prices would have a significant effect on revenues in the second half of the year.