Domestic electricity bills set to fall by pounds 15

HOUSEHOLD ELECTRICITY bills are to fall by an average of pounds 15 from next April - a reduction of 5 per cent - following tough new price controls announced yesterday by the industry regulator.

Callum McCarthy, the head of Ofgem, also told Britain's 14 electricity companies that prices will have to be reduced by a further 3 per cent in real terms in each of the following four years. Consumer groups welcomed the price reductions but share prices of some of the big quoted electricity companies fell sharply on the news.

The biggest one-off cut next year will be for customers of South Wales Electricity who will see the average annual bill of pounds 290 fall by pounds 23-pounds 28. The smallest cut in prices will be for households in the Scottish Power region where the average bill of pounds 274 will fall by pounds 3-pounds 8. Mr McCarthy described the price controls, which apply to charges for operating local electricity distribution networks, as "tough, fair and realistic". He also said he was ready for any company who sought to challenge him by appealing to the Competition Commission.

The regulator also outlined harsher penalties for electricity suppliers who fail to maintain standards of service. Mr McCarthy will be able to levy fines of pounds 10m-pounds 15m from next year, rising to as much as pounds 50m in 2002. The reduction in electricity bills comes hard on the heels of a 14 per cent cut in water charges, worth pounds 34 a year to the average household. Mr McCarthy said that when arrangements for trading electricity were overhauled, probably next year, consumers could look forward to further reductions in bills of as much as 13 per cent - or pounds 35. Rodney Brooke, chairman of the National Electricity Consumers Council, welcomed the move.

"Overall, it is clear that the regulator has listened to the consumer voice but there is a need to analyse the proposals company by company since they vary so much to see if there is scope for further cuts," he said.

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