RECs braced for electricity review

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The Independent Online
The regional electricity companies are braced for a fresh pronouncement today from the electricity regulator, Professor Stephen Littlechild, on future price controls in the sector. Professor Littlechild is expected to confirm a new review of electricity distribution charges, with a view to toughening the price cap from next year.

The regulator plunged the sector into turmoil two weeks ago when he first suggested a review may be needed, wiping £3.5bn from the value of electricity shares. The average share price of the regional companies was about £6.27 yesterday, compared with £7.69 on the Friday before Professor Littlechild dropped his bombshell.

Tomorrow's statement is expected to be toned down under government pressure to avoid further controversy over the recent £4bn sale of shares in the generators, National Power and PowerGen. Their new shares suffered after Professor Littlechild's last announcement, which came within a day of the start of dealing.

The expected distribution price review turns on its head a five-year regime agreed only last August, although this will take effect for one year from 1 April while work on a new control proceeds. The new review is likely to leave the industry in a state of uncertainty until June or July.