Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Legal threat to domestic power free-for-all

Michael Harrison
Wednesday 04 December 1996 19:02 EST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Professor Stephen Littlechild, the electricity industry regulator, has been warned that his plans to open up the domestic market to full competition in 1998 are unlawful. The warning is contained in a confidential letter sent last month by lawyers acting for the 12 regional electricity companies (RECs) and the two Scottish power producers.

The letter, written by a partner at the law firm Herbert Smith and dated 19 November, claims the proposed regulatory framework would prevent electricity suppliers from recovering unpaid bills or disconnecting customers outside their own franchise areas who refuse to pay.

The letter also claims that it would be unlawful to proceed even with the phased introduction of competition if the new system has not been fully completed, tested and implemented by April 1998.

According to Herbert Smith, the problems thrown up by the proposed changes in the licences that all electricity suppliers will require are such that entirely new primary legislation may be required.

The leaking of the letter comes just two days after Professor Littlechild turned down an appeal from the electricity industry for the liberalisation of the domestic market to be phased in over 18 months.

Instead Professor Littlechild has decided that the phasing in period should last only six months so that by September 1998 all 23 million domestic electricity customers will be entitled to shop around between suppliers.

The industry is also lobbying to be allowed to pass on the full costs of preparing for 1998 to their customers, put at between pounds 500m and pounds 1bn. The bulk of the money is investment in the computer systems, software and training needed to allow suppliers to settle accounts through the electricity pool and supply customers outside their existing monopoly franchise areas.

Commenting on the "fundamental legal issues" that have yet to be resolved, the letter says: "We consider that these issues and the failure to resolve them thus far are serious enough to suggest that it would be unlawful for you to adopt the proposed modifications and associated codes in anything like their present form." If these problems remain unresolved it would "undermine the legal basis of the 1998 project".

The RECs appear to be particularly concerned about how they would recover charges from customers who refused to pay or continued to receive electricity through their local supplier after a contract had expired with a "two- tier supplier" - a supplier other than the local electricity company.

"From their experience in the supply market to date our clients consider that market participants could suffer significant losses as a result of this problem which would, in turn, be passed on to paying customers in higher prices."

Last night a spokeswoman for Professor Littlechild confirmed he had received the letter and had written back offering a meeting to discuss the concerns raised.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in