Sparks fly over efficiency levels among regional electricity firms

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The Independent Online
Divisions between the regional electricity firms deepened yesterday when South Western Electricity attacked claims by Eastern Electric that it is more efficient than some of its rivals and as a result charges its customers less.

Eastern has argued that companies with lower domestic bills should be treated favourably in the current review of prices by the regulator, Offer.

John Seed, chief executive of SWEB, said that the question is not one of efficiency but of how much it costs to serve the customer base. SWEB has only 88 customers per square kilometre compared with an average 152 for the industry and 2,914 for London Electricity at the other end of the scale.

Mr Seed said:"Eastern has a between two and three time our customer base and so has a much lower fixed cost per customer." He said he does not believe that Professor Littlechild, director-general of Offer, will be swayed by Eastern's argument when he reports on new electricity price controls next month.

Mr Seed also said that it is "not appropriate" for his company to follow Seeboard's example of offering an pounds 8 annual reduction in customer bills ahead of the price review. He said that Seeboard, which has already been criticised in the industry, has "introduced another variable" into the regulatory equation.

Mr Seed was speaking as SWEB announced a 23.4 per cent increase in the dividend to 29p for the year to 31 March after buying back and cancelling 10 per cent of shares. The company plans to seek permission at the annual meeting in August to buy back a further 14.9 per cent.

SWEB's pre-tax profits fell to from pounds 116.8m to pounds 111.5m, after a pounds 20m charge related to the sale of the retail arm to Norweb. Earnings per share dropped to 72.4p from 75.4p a year ago.

The retail disposal has resulted in 250 voluntary job losses with a further 50 people are expected to be made compulsorily redundant. This is in addition to about 250 job losses in the core electricity business in the past year and a further 500 to be achieved by the end of the decade.

Mr Seed said SWEB plans to open up the domestic gas market in the south west of England next year through its joint venture with United Gas.

An area including some 500,000 households in the region has been chosen for the pilot scheme, with nationwide competition planned for 1998. The company has also invested pounds 10m in a fibre optic telecommunications network from Bristol to Land's End.