Ofgem warns of higher costs as new trading system is further delayed

OFGEM, the electricity regulator was yesterday forced into the embarrassing admission that its new system for trading electricity will be delayed until well into the New Year.

OFGEM, the electricity regulator was yesterday forced into the embarrassing admission that its new system for trading electricity will be delayed until well into the New Year.

The development will also come as a further personal set-back for Stephen Byers, the Trade and Industry Secretary, who had promised that the New Electricity Trading Arrangements (Neta) would start on schedule on 21 November.

Neta will replace the current "pool" system for trading electricity, which acts like a clearing house, with a full-blown spot and futures market. The change is designed to cut the cost of electricity and end the manipulation of electricity prices by some operators.

Last month, Ofgem said that, due to technology glitches, it would not make the 21 November "go-live" date, but it hoped to launch the service before the middle of December.

Yesterday, Ofgem admitted this would not be possible, because of ongoing IT problems, and that the earliest launch date is now 31 January.

The regulator also said that the delays would add to the cost of Neta implementation, but it was too early to quantify this. Logica, the IT services group, is the outside consultant on the project. The change over to Neta was already estimated to cost Ofgem £90m, and each of the 90 participating companies in the pool up to £10m each, for new computer systems.

Angelos Anastasiou, an analyst at Williams de Broe, said: "If they are to delay Neta that far, it makes sense to skip February and March too. Most electricity contracts begin on 1 April and the implementation ... could be timed to coincide.... Also, weather can be very cold in February, leading to high demand, which does not make for a good time to introduce a new system."