Energy companies warn of power supply threat

Three of the UK's largest energy companies have written to the regulator warning that it is not doing enough to safeguard future gas and electricity supplies.

Scottish Power, Powergen and BP believe that security of energy supply has slipped down Ofgem's three-year agenda.

Scottish Power said: "The current market arrangements may not be sufficient to avoid future security of supply problems. There is a need to ensure capacity remains available."

The company, headed by Ian Russell, wants Ofgem to introduce a system of capacity payments to ensure power stations remain on standby even when they are not generating.

In its letter to Ofgem, Powergen criticised the regulator's recently published corporate plan. "Given the importance of [security of supply] it is surprising that only one deliverable is included. There does not appear to be any specific indication on how Ofgem will keep security of supply under review."

BP is concerned that the UK faces a "major challenge" as it becomes a net importer of gas. "BP is disappointed that there is no mention of this as a specific activity for 2004-2005," it says.

Ofgem dismissed these concerns. "It is part of our statutory duty to protect security of supply," a spokesman said. "On electricity, the market sends the right signals. Last winter, prices went up and plants came out of mothballs. On gas, there is extra capacity coming on at Milford Haven and the Isle of Grain and there is an upgrade to the interconnector."