Regulator acts to cut big users’ bills

Big industrial users are hoping for cheaper power in the year ahead following proposals from the electricity regulator to stop generators manipulating prices. This week’s initiative from Offer was welcomed by the Major Energy Users’ Council (MEUC), which claims that artificially high pool prices have caused 4 7% rises in the 12-month energy contracts offered, […]

Big industrial users are hoping for cheaper power in the year ahead following proposals from the electricity regulator to stop generators manipulating prices.

This week’s initiative from Offer was welcomed by the Major Energy Users’ Council (MEUC), which claims that artificially high pool prices have caused 4 7% rises in the 12-month energy contracts offered, to run from April.

‘It may bring some relief to April contracts,’ said Don McGarrigle, chairman of the MEUC’s electricity group. ‘I’m hoping it’s not too late.’

Evidence indicates that market manipulation has increased alarmingly.

The number of ‘spikes’ in the electricity pool half-hour periods where the system marginal price (what generators bid) exceeds £60/MWh has shot up.

There were 238 spikes in the last quarter of 1998, compared to 178 in last quarter of 1997 and just 11 in 1996. There were 180 spikes in January this year alone.

On Tuesday, Offer issued a consultation document on pool-price manipulation, seeking views on two measures to curb the practice: simplified bidding, and the removal of inflexibility markers, which cut the number of competitive bids.

This follows last week’s announcement by the Pool’s Executive Committee of measures to remove ‘price anomalies’ amending the system of scheduling for generating plant and the way the system marginal price is calculated.

Offer welcomed these proposals but said if they failed to work it would want to see ‘more fundamental changes’. It is seeking views on these with responses requested by 15 March.

* Most EU member states must have arrangements in place from 19 February to open at least 26.5% of electricity markets to competition.