Regulator calls for break-up of Nuclear Electric

OFFER, the electricity industry regulator, yesterday called for the break-up of the state-owned Nuclear Electric company in order to increase competition in the electricity generating market.

The regulator also said there was no case for the Government to fund any new nuclear plants or to subsidise the industry in any way that might distort competition.

The recommendations from Professor Stephen Littlechild, the director-general of electricity supply, come in his submission to the Government's review of the nuclear sector. Nuclear Electric is lobbying for government approval for a new reactor, Sizewell C in Suffolk, which would need about pounds 1bn in public funds.

Professor Littlechild is concerned that Nuclear Electric, with about 25 per cent of the electricity generating market in England and Wales, has too much influence.

He expressed similar concerns about Scottish Nuclear, which generates much of the electricity north of the border.

He said: 'Given the significant market power of the two nuclear companies, and their opportunities to extend this, it is important to ensure that nuclear companies are not subsidised in such a way as to distort their output, pricing and investment decisions.'

He added that concerns about the scope for complex monopoly or collusion apply as much to Nuclear Electric as to National Power and PowerGen, the two privatised generators in England and Wales.

He also called on ministers to ease the burden on consumers by reducing the existing subsidy for Nuclear Electric. This is decided annually and amounts to pounds 1bn or more, raised through a levy on electricity bills. He would like this to be set in advance and reduced steadily until its expiry in 1998.

Professor Littlechild wants to see the privatisation of Nuclear Electric and Scottish Nuclear to force them to face up to private- sector financial disciplines. However, he suggests that Nuclear Electric's six Magnox reactors be kept as a separate public-sector company.

Nuclear Electric should also be made to give two of its five modern advanced gas cooled reactors to Scottish Nuclear, to increase competition further in England and Wales. In return, the Scottish company would have to give one plant to Nuclear Electric, which would then start to compete in Scotland.