The introduction of competition into the retail electricity market in the UK, due to start in April, will not now take place until September at the earliest. The announcement was made by the government after it became clear that the electricity trading systems required to enable retail trading would not be ready for the April deadline.
Under revised plans announced by the UK regulator, Offer, competition will start in September in four franchise regions, Eastern, Yorkshire, Seeboard and Manweb. The midlands, northern England and Scotland will see competition in October and the rest of the country will enter the market in December.
The delay has been caused primarily by a redesign of the trading system. This redesign was agreed late in 1997, making it impossible to complete testing in time for the original deadline. Even before the need for a new design was agreed, however, several companies were running behind the April schedule.
One consequence of the delay will be that the regional electricity companies will have their revenue reduced by around $80 million in the next price review to offset the financial benefits to the companies of the later introduction of competition. Consumer groups have called for more compensation for customers.
The delay in the introduction of retail electricity competition has also affected the retail gas industry. In anticipation of deregulation, electricity companies have started to offer gas as well as electricity to their regional customers. Offer and the gas regulator Ofgas has asked the companies to stop this dual fuel supply offer in their own franchise areas, although the companies can still sell gas in other parts of the country.
The move to curtail the sale of gas by the electricity distribution companies follows a claim by the main UK retail gas supplier, Centrica, that allowing the electricity companies to sell gas in areas where they retained a monopoly on electricity supply would distort the market and lead to unfair competition.
The retail gas market has been open to competition since 1 October 1996. Centrica’s position has been upheld by the regulators.
Five regional companies, Eastern Group, Northern Electric, Scottish Power, Midland Electricity and East Midlands have so far refused to comply with the request from the regulators. Two have also threatened to ask the regulator to refer the gas market to the UK Monopolies and Mergers Commission. It is probable that this will happen anyway, if the companies continue to reject the regulators’ request.
In addition, the regulators have asked the regional electricity suppliers to offer their dual gas and electricity meter reading service to all suppliers on a non-discriminatory basis.