Taxpayer faces massive bill for power shake-up upup

The Government may be faced with a bill running into millions of pounds if it is to meet its target of allowing all 23 million domestic electricity customers to choose their supplier from 1998, it emerged yesterday.

Industry officials have warned that if competition is introduced on a trial basis before 1998 in the way that it has been in the gas industry - then it may result in large compensation payments to RJB Mining, headed by Richard Budge, which took over the English coalfields a year ago.

The problem arises from the so-called "back-to-back" contracts signed between British Coal, the two electricity generators, National Power and PowerGen, and the 12 regional electricity companies at the time of privatisation.

Under these the generators are contracted to buy about pounds 900m of coal a year from RJB Mining until April 1998. All the electricity generated from the coal is then sold to the Recs to satisfy demand from the domestic market.

If the market is opened up to competition on a trial basis before 1998 the Recs may lose some customers. The knock-on effects would be reduced demand from the generators and a reduced requirement on their part for coal.

Officials at the Office of Electricity Regulation said yesterday that in such circumstances the Government would have to step in and compensate the industry.

This is one of the reasons it may not be possible to run pilot trials before April 1998, placing a question mark over the Government's ability to meet its deadline.

Professor Stephen Littlechild, the industry watchdog, insisted yesterday that the industry was "on track" to meet the target of liberalisation in 1998. He said he expected all the main elements needed to create the structure for competition to be in place within the next month. This would enable rival Recs and other suppliers to test their systems for supplying customers in regions other than their own and settle accounts within the electricity pool, the wholesale market for England and Wales.

However, many industry observers believe that the Government and the regulator have set themselves too formidable a timetable.

Professor Littlechild conceded it was "tight" but achievable. But one large generator said it did not see how the target date could conceivably be met.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss