Deregulated UK electricity market to come at a price

Deregulation could cost UK electricity companies £150m a year to maintain, according to electricity regulator, Offer.

The regulator estimates electricity companies would have to lay out this level of investment to ensure the smooth running of the systems trading within the domestic market.

But a spokesman for the Electricity Association, the UK electricity trade body, claimed customers would still benefit from cheaper electricity. "The benefits are clear and the cost path to the customer, in terms of the system which allows open competition, is still in a downward spiral," he said.

The spokesman claimed customers have already seen an 8 to 10 per cent discount in prices, despite electricity companies spending £1bn on the transformation of systems to cope with deregulation. Professor Stephen Littlechild, chairman of Offer, said customers will benefit from a further enforced discount of 6 per cent next April.

The Electricity Association spokesman claimed even more price reductions will be seen once companies put pressure on the generators to lower their prices.

Next June marks the end of the regional monopoly of the 14 UK public electricity companies privatised since the early 1990s.