Recs face pounds 50m competition delay fine

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The Independent Online
John Battle, the Energy Minister, was under increasing pressure last night to impose stiffer financial penalties on the electricity industry after several suppliers warned that even the five-month delay in launching domestic competition might not be enough. Michael Harrison reports.

Professor Stephen Littlechild, the electricity regulator, yesterday bowed to the inevitable and confirmed that the opening up of the domestic electricity market would be delayed from this April to September - at the earliest. Customers in some parts of the country will not be free to chose their supplier until June, 1999.

Describing the delay as "disappointing", Professor Littlechild added that it would result in penalties of about pounds 50m being paid by the 14 suppliers in the form of lower bills for their 26 million customers. The rebate averages less than pounds 2 a customer and will not be paid until 1999.

However, Mr Battle will come under pressure to take a tougher line with the 12 regional electricity companies (Recs) and the two Scottish suppliers when he meets them along with Professor Littlechild tomorrow.

Centrica, the trading arm of British Gas which will also attend the meeting, called on Mr Battle to force the electricity suppliers to pay compensation of pounds 20 a head - the sum it calculates customers could have saved if the competitive market had gone ahead on schedule.

The two energy regulators, Offer and Ofgas, are also preparing to issue new guidelines clamping down on "dual fuel" offers from the Recs whereby customers can get cheaper gas bills if they agree to continue buying electricity from their local supplier.

Offer and Ofgas have been investigating whether this amounts to predatory pricing and whether it distorts the market by making it less likely that customers will switch suppliers when competition starts. So far only one other rival company has applied for a licence to enter the domestic electricity market in addition to Centrica, which already faces competition for domestic gas customers.

Professor Littlechild took the decision to postpone the opening of the market on the advice of the programme manager PA Consulting which blamed the delay on changes needed to allow each of the Recs' computer systems to talk to one another. But he said he did not rule out the possibility of the market opening up in some areas of the country before September if testing went well.

At least two Recs cast doubt on the ability of the industry to meet even a September deadline. One said: "Even the revised timetable is shaky. It relies on there being no further changes to the specification but the PA Consulting report says there is a significant risk that further changes will be needed."

Another Rec said: "Achieving even the new delayed deadlines will require a lot of dialogue and a lot of central control and there is no leeway built in."

Under the revised timetable competition will start first in the Eastern, Seeboard, Yorkshire and Manweb regions. Scottish Power, Hydro-Electric, Midlands and Northern will open up in October and the remaining areas in December. In each region the opening of the market will be phased over six months.