Offer monopoly decision soon

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The Independent Online
OFFER, the electricity watchdog, is expected to announce this week whether it will refer National Power and PowerGen to the Monopolies and Mergers Commission.

Professor Stephen Littlechild, the director general, said he might refer one generator without the other. City analysts believe this puts National Power at greater risk than PowerGen.

Professor Littlechild is concerned that the generators have too much influence on electricity prices, particularly those in the electricity trading pool. He wants them to help competition to develop by agreeing to sell power plants to other companies. He is also demanding assurances that prices be kept at acceptable levels until full competition is in place.

Analysts say National Power's problems could arise for several reasons. It has taken a tough stance against selling power plants; it has a market share of about 33 per cent while PowerGen's is thought to be under 25 per cent; and its power stations play the biggest role in setting the prices paid in the electricity pool.

Professor Littlechild told a conference in London last week that generation was one of the most immediate challenges to be faced by the industry over the next few years.

'There is still a transitional problem before the market is fully competitive and that is reflected in the fact that the large generators still have the ability to increase prices in the pool,' he said. 'There is still an element of monopoly there that is of concern.'

While a decision is due soon, industry sources say that it could slip to nearer the end of the month. Further meetings with the generators will take place over the next few days.

A decision to refer either generator would threaten any Government attempt to divest the remaining 40 per cent stake which it holds in both National Power and PowerGen - a sale that could raise pounds 4bn.

Plans to privatise British Coal would also suffer. The coal company depends almost entirely on the generators for sales.