Manufacturers are pressing the Government to cap electricity prices at 20% below current levels until reforms create a more competitive market in generation.
The three associations representing big consumers Major Energy Users’ Council (MEUC), the Energy Intensive Users’ Group (EIUG) and the Utility Buyers Forum (UBF) have stepped up campaigns for price controls.
This week, the UBF wrote to trade and industry secretary Peter Mandelson while the MEUC put its case to industry regulator Professor Stephen Littlechild.
Don McGarrigle, who chairs the electricity group at the MEUC, said the big generators with coal-fired plants National Power, PowerGen and to a lesser extent Eastern were manipulating the market to keep pool prices high, which in turn was setting the benchmark for the annual contracts that large users negotiate with generators.
Bob Spears, the UBF’s electricity director, said contracts being negotiated to run from October had risen by 4% to £60m. ‘Industry can ill afford such rises when it is under pressure on so many other fronts,’ he said.
McGarrigle said MEUC and other groups are seeking a cap on the pool price of 2p/kWh until the reforms take effect.
He said this would still allow generators to make a reasonable profit, as the generating cost of old coal-fired plant, with capital cost written off, was about 1.7p/kWh. ‘Some of the coal-fired stations have fuel costs of about 1.4p/kWh, and operating costs would only add 0.2p/kWh to that.’
By comparison, he said prices so far this year were on a par with 1997/8 levels, when the average pool price was 2.57p/kWh.
Mandelson is due to respond to the proposals for reforming the market before the end of the month.