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Tuesday, June 30, 1998 Published at 13:35 GMT 14:35 UK

Business: The Company File

Generators 'have too much power'

Coal-fired power stations for sale?

Britain's electricity regulator has told the country's electricity generators to sell off capacity in order to lower prices to consumers.

Professor Stephen Littlechild said that National Power and PowerGen were responsible for forcing the pool price of electricity up 26% last winter, and threatened to take them to the Monopolies and Mergers Commission if they did not divest voluntarily.

In its investigation of the power generation market, the Office for Electricity Regulation (Offer) said that the two big generators had mothballed plants to keep prices up, citing PowerGen's closure of one its three coal-fired units at Grain in Kent which it called a breach of its license.

[ image: Electricity prices need to come down]
Electricity prices need to come down
Professor Littlechild said: "Further steps need to be taken to increase the competitiveness of the generation market ... the ability of the two major generators to prevent decreases (in generation prices) as costs fall and new entrants increases ... demonstrates an unacceptable extent of market power.

"This is being exercised at the expense of consumers and also at the expense of coal as a fuel for electricity generation."

The regulator's remarks correspond to the government's strategy to reform the energy market in order to save the coal industry.

Last week Margaret Beckett, President of the Board of Trade, announced plans to reform the electricity pool, which chooses which power plant will go on stream at any given time.

But the two electricity generators are reluctant to reduce their 40% market share voluntarily, which has been put under pressure due the rise of gas-fired power stations built by the regional electricity companies.

National Power has remained defiant, announcing last week that it has no plans to sell any of its coal-fired power stations.

PowerGen said on Monday it would be willing to sell up to 2,000 megawatts of capacity if it would help approval of its plans to acquire East Midlands Electricity for £1.9bn.

But the regulator said he was not convinced that the company was offering enough and warned that the market conditions that had led him to advise against the company's previous merger plans, with Midlands Electricity in 1995, were still in place.

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