Price fears spark power rethink

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Brian Wilson, the energy minister, is to press for changes to the way electricity is traded in Britain, amid fears that wholesale prices are falling to unsustainable levels.

The introduction of Neta, the computerised trading system, has driven prices down 18 per cent in 12 months. But this is now threatening companies such as British Energy, the nuclear generator, and future investment in renewable electricity sources.

The Government is worried that if wholesale prices fall further then it will make its emissions targets untenable and may even endanger security of future supply.

Mr Wilson told The Independent on Sunday: "I am not interested in setting targets to promote renewable energy if what is happening on the ground is actually pulling in the opposite direction. We will make changes to Neta to ensure that it does not prevent the development of low-emission power sources."

The minister refused to say what measures would be introduced, but it is understood that legislation could be introduced in the next parliamentary programme.

The Government wants to set up British Electricity Trading and Transmission Arrangements to allow Scotland to join Neta. The reforms could come in this Bill.

One proposal under consideration would be to give the energy regulator Ofgem wider powers to monitor or intervene in Neta if it believes that the trading system is threatening certain generators.

The effect of falling wholesale prices on generators will be highlighted on Wednesday when British Energy reports its full-year results. Analysts believe the company will announce that its UK operation made a loss because of the price falls. British Energy is expected to report a £33m pre-tax profit, mainly on the back of its US and Canadian interests.

Over the last two months companies such as International Power, AES and TXU have mothballed generating plant, over fears that it is uneconomic to keep them online.