The improved forecast came in the annual statement that projects demand for the next seven years issued by the National Grid Company, which transmits electricity throughout England and Wales.
The predictions, based on information from the 12 regional electricity companies, show demand increasing by 1.5 per year on average to 2001/2002 compared with previous forecasts of 1.3 per cent a year. John Uttley, NGC finance director, said: "I think it is a sign of confidence in the economy."
The report also shows that electricity generating capacity could outstrip demand by up to 40 per cent by 2001. The likely excess capacity is less than this, as plans for some new power stations may not go ahead. There may also be more unexpected closures of older plants.
Over the last 12 months, the NGC has signed transmission contracts for three new gas-fired power stations and for Nuclear Power's proposed Sizewell C station in Suffolk. The contract with state-owned Nuclear Electric shows the company's determination to proceed with the £3.5bn Sizewell C plant. If funding can be secured, the power station will come on stream in two phases in seven and nine years' time.
The seven-year statement shows sharp differences between the north and south of the country. In 1995/96 generation far outstrips demand in the North, but in the South there is not enough local generation to meet demand. The costs of having to move large amounts of electricity around the country forces the NGC to charge northern generators as much as 15 per cent more to use the system.