Rethink on electricity pricing gets under way

ELECTRICITY price increases for larger users may cease to be controlled following a review of price controls launched yesterday by the industry watchdog, Offer.

Professor Stephen Littlechild, Offer's director-general, also questioned whether regional electricity supply companies should continue to be allowed to pass on to customers costs related to electricity generation.

Professor Littlechild launched a consultation document on the review yesterday, inviting views from anyone involved in the industry as well as customers and consumer groups.

The document also raises the question of whether the profits of the electricity companies should be capped. However, City analysts believe Offer is unlikely to take this action as it would remove the incentive to increase efficiency.

At present electricity supply prices are linked to inflation minus an 'X' factor, which varies from company to company. Costs outside the companies' control can also be passed through to customers. But a subsidiary cap limits the overall increase to inflation for domestic consumers, who are forced to buy from their local company.

The revised price control formulae are due to take affect in April 1994.