UK proposes lifting electricity controls in April

By the OGJ Online Staff

HOUSTON, Dec. 18 -- UK's electricity regulator Monday proposed lifting all price controls on electricity supply in April and said it will turn its attention to reform of the high voltage electric transmission system.

If confirmed, the Office of the Gas and Electricity Markets (Ofgem) will have withdrawn from 70% of the activities subject to regulation prior to market privatization. Natural gas price controls were lifted in April of this year.

The agency set four key priorities for the coming year. It proposed extending more competitive prices and greater choice for electricity consumers in Scotland. Scottish customers and electricity companies are missing out on savings because competition in the wholesale electricity market in England and Wales does not extend to Scotland, Ofgem said. In addition, the Scottish electricity industry doesn't have access to markets in England and Wales.

Reforms will also create a wider British market for electricity which will benefit Scottish electricity generators, Ofgem said. Reforms to create British Electricity Trading and Transmission Arrangements (BETTA) need primary legislation, Ofgem said, and the work to introduce them will take several years. Ofgem estimated deregulation to date has saved UK consumers about $20/year on their household energy bills. With competition well-established throughout Britain's gas and electricity industries, Ofgem said it will need to continue to monitor the markets, and take enforcement action where necessary.

With the generation supply working well, the agency plans to turn its attention to transmission. The current arrangements for access to the high voltage electricity transmission system are flawed, according to Ofgem. The agency said it will continue work, begun 10 years ago, to reform the system.

Reforms will be aimed at making connection costs more transparent and help securing long-term electricity supply by giving National Grid Co. better demand signals. Ofgem said this is expected to influence decisions about where and when to invest in the network. The goal is to ensure access to the monopoly electricity transmission system on fair and competitive terms, according to Ofgem.

Ofgem also proposed expanding its environmental oversight on behalf of the government. This includes reviewing the regulation of electricity distribution networks to ensure there are no barriers to the development of distributed generation, such as micro-combined heat and power units and wind turbines, which connect to the distribution network.

The agency's is projecting a 5.7% budget increase next year. It said the increases will be offset by reductions in other areas were savings are expected, as well as the completion of major projects. A definitive plan and budget for 2003-2003 and 3-year strategy will be published in March 2002.