Power shake-up to go ahead

"The lights will not go out," says Ofgem

The government is pressing ahead with an overhaul of the electricity trading arrangements, deciding to go live with the new system in just five weeks time.

The decision to go ahead came at a meeting of the Department of Trade and Industry (DTI), industry regulator Ofgem and some electricity firms on Monday.

Ofgem and the DTI are approaching the culmination of three years of efforts to create New Electricity Trading Arrangements (Neta) - a system designed to increase competition and bring down prices for households and businesses.

"All concerned should plan on the basis that this is likely to occur," the energy regulator Callum McCarthy told power firms.

Preparing for change

Power companies are thought to be at different levels of preparation to adopt the system, as there was some speculation that Neta could be subject to further delays.

There were also industry-wide rumours that the government was nervous of a pre-election launch in case something goes wrong.

We've got the industry with us as far as we're aware

Ofgem

"We've got the industry with us as far as we're aware," an Ofgem spokesman told BBC News Online.

"They want it as much as us," he added.

But the chairman of the existing electricity trading system, 'the pool', had previously called for the system not to be launched as planned.

And the Financial Times newspaper had reported that some electricity companies were nervous about the system because of an outage in the testing last week.

"But that's what the testing is all about," Ofgem told BBC News Online.

Ofgem's Callum McCarthy attended the meeting

It is largely unknown what exactly would happen to electricity supply if the system did crash, but it is unlikely to have an immediate effect on electricity supply.

"There's no danger of the lights going out, we wouldn't put that sort of system in place," said Ofgem.

Neta was orginally scheduled to be launched in November, and British industry had been hanging in limbo to see whether all would go ahead this time.

No guarantee

The uncertainty surrounding Neta has meant that up until last week only a very small volume of forward electricity contracts had traded for March onwards.

And annual contracts to purchase a year's supply of electricity, which often run from April to April, have not been renewed.

Although Neta is designed to make sure that lower wholesale costs are passed onto the end-user, there is no guarantee of lower prices.

Wholesale gas prices, also under Ofgem's watchful eye, have soared since a fully competitive market was established, with the consumer now facing rising gas bills.