Electricity may be opened up in 1996

PROFESSOR Stephen Littlechild, director general of Offer, will shortly investigate the domestic electricity market to see whether it can be opened up to competition in 1996, as many as five years earlier than planned.

Clare Spottiswoode, his opposite number at Ofgas, the gas industry watchdog, has said she believes the timetables for reduction of the monopoly threshold within the gas and electricity industries should be harmonised. The regional electricity companies are already free to supply gas to industrial customers using 2,500 therms of gas or more. They will be able to supply up to 10 per cent of the domestic market after April 1996 and all consumers by 1998. However, under current proposals, the RECs will begin to face competition in their own markets only in 1998.

The discrepancy was highlighted in a letter to both regulators by James Ball and Jonathan Stern of Gas Strategies, the small but highly respected gas consultancy. They argue that the monopoly-protected electricity distributors will enjoy an unfair advantage over other companies entering the newly opened gas market. They may also be tempted to cross-subsidise their entry, with 'bundled' packages of electricity and gas on offer to consumers.

Ms Spottiswoode has replied with an open letter indicating that she shares these fears and supporting alignment of the timetables for liberalisation of the two industries. She also says that Ofgas and Offer should work together to ensure that companies selling both gas and electricity to consumers cannot obtain an unfair advantage.

A spokesman for Offer said: 'Effective and unsubsidised competition in both markets is clearly the best way forward.

'We shall certainly be talking to Ofgas,' he added, though he pointed out that Professor Littlechild would need to examine the electricity distributors' licence conditions and the supply price control agreed last summer before he could decide whether it was feasible to accelerate liberalisation.