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Friday, 1 November, 2002, 15:40 GMT
Row over power cut pay-outs
Removing a fallen tree
Storm damage has disrupted power supply
Power firms have come under fire for refusing compensation to UK households who lost their electricity supply following recent storms.

The energy regulator Ofgem has dismissed as "misleading" claims from one supplier, Aquila, that it would face costly penalties for making blanket payments to homes which had been cut off.


They would not be penalised, they would just have less profit at the end of the day

Mark Wiltsher, Ofgem

And the energy minister Brian Wilson has called for an investigation into the issue after calling it "a piece of brass neck" for companies to make such decisions.

Consumer watchdog Energywatch has estimated that power companies could face compensation claims of more than 4m ($6.3m), but is urging all affected customers to apply for a pay-out.

Widespread criticism

Several thousand people in the UK were left without power for almost a week after Sunday's storms damaged electricity supply.

However, at least three companies, Aquila, Manweb-Scottish Power and 24/7, have said they will not pay compensation to affected customers for the loss of their power.

Under the current set-up, the firms are obliged by law to pay compensation in the event of disruption, but can decide themselves when a pay-out is appropriate.

The firms are now claiming the storm damage was the result of "exceptional circumstances" and they would therefore not make payments.

The decision has been criticised by the energy watchdog, the regulator and the government minister.

What penalty?

Energywatch told BBC Radio 4's Today programme: "It is wrong that the companies themselves can decide that the weather conditions have been so severe that they won't pay.

"It should be the performance after the event that counts, not how bad the weather was."

Aquila Networks, based in the West Midlands, has claimed that it would be penalised by the regulator Ofgem if it paid out and, by doing so, missed industry cost-reduction targets.

Caroline Boots, communication director at Aquila, told BBC News Online that it would be "penalised by several million pounds" and that this, added to the cost of repairs, would hit the company hard.

"We could be looking at several million pounds," said Ms Boots.

But Ofgem has dismissed the suggestion as "misleading", pointing out that companies receive incentives for meeting targets, but not penalties for missing them.

"There is no cost-reduction target in the price control," said Ofgem communications manager Mark Wiltsher.

"They won't be penalised, they would just have less profit at the end of the day," said Mr Wiltsher.

Pay up

Customers have a month to submit claims for compensation, and Energywatch is urging them to do so.

"These companies have been trying to put people off claiming by saying there won't be compensation," said Ann Robinson, chair of Energywatch.

"People should claim and test the system, and let's find out."

The pay-outs were previously negotiated at a rate of 15 for the first 18 hours of disruption, then a further 25 for any additional 12 hour period.

If a claim is rejected, it is referred to Ofgem, which has the final say.

"We have ultimate power to decide whether they (power firms) were justified in their decision," said Ofgem.

See also:

31 Oct 02 | Europe
30 Oct 02 | Wales
28 Oct 02 | Business
28 Oct 02 | Business
29 Oct 02 | UK
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