Power firms face capacity curbs

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The Independent Online
THE TWO big electricity generators, National Power and PowerGen, could be forced to dispose of a third of their coal-fired stations under proposals to be unveiled next week by the industry regulator.

Professor Stephen Littlechild, the director general of Offer, is expected to call for a radical opening-up of the generating market, which could see the two companies obliged to dispose of as much as 8,000 megawatts of capacity.

The regulator's move follows the Government's energy review, which called for plant disposals to increase competition in generation, bring down electricity prices and increase the market for coal.

An Offer spokesman said that Professor Littlechild would make a statement next week on the prices in the electricity pool and the market dominance of the generators. "The aim is to increase competition in generation and plant disposal has a role to play in that," he added.

The industry is braced for a more ambitious disposal programme than three years ago when National Power and PowerGen agreed to sell 6,000 megawatts of coal-fired capacity to Eastern in return for the lifting of price controls in the electricity pool.

Professor Littlechild is believed to be looking for several new entrants to come into the generating market to produce real competition. "If he genuinely wants competition then he isn't going to settle for just 2,000 megawatts from each generator," said an executive.

National Power has 13,000 megawatts of coal fired capacity, PowerGen about 11,000 megawatts and Eastern 6,000 megawatts. Between them they control electricity prices for 90 per cent of the time.

Following the decision to block the construction of most new gas-fired stations, splitting up the generators' coal-fired capacity will be the only way of introducing more competition. However, there is already an estimated 10,000 megawatts of gas fired capacity either under construction or likely to get consent - enough to displace more than 20 million tons of coal burn and increase gas's market share to nearly 50 per cent.