Offer calls for nuclear levy cut

OFFER, the electricity watchdog, has called for a cut in the subsidy to Nuclear Electric, the state- owned company. The subsidy adds 11 per cent to electricity bills in England and Wales via a levy on electricity generated from coal, oil and gas, and leads to an increase in Nuclear Electric's profits of over pounds 1bn a year.

Professor Stephen Littlechild, the director-general of Offer, said: 'An 11 per cent burden on all electricity costs is a significant burden on all customers. In a fully competitive market, customers would not have to pay the higher costs of nuclear electricity.'

He said a pre-set fall in the levy until its cut-off date of 1998 would help to make Nuclear Electric more efficient, but said that changes in the rules must come from the Government.

Professor Littlechild was addressing major energy users, who have complained about soaring electricity bills. Offer made it clear that it also wanted domestic customers to benefit more from electricity privatisation.

Nuclear Electric reacted angrily to the regulator's comments. Bob Hawley, the company's chief executive, accused Professor Littlechild of unjustified and untimely interference in commercial affairs. In a letter to Offer, he said: 'I do not need your incentive, nor do I believe it your place to give it to me.'

Mr Hawley said the levy was passed back to the Treasury to help cover provisions for decommissioning nuclear power stations. He said Offer had failed to address the question of who would foot that bill without the subsidy.

Professor Littlechild said that decommissioning costs for nuclear stations would not be incurred until well into the next century.

PowerGen, the electricity generator, said earlier that the problem of high electricity costs for major users should be resolved through the levy. The company fears that high prices might drive top customers overseas.

Nuclear Electric announced a 48 per cent increase in profits last year to pounds 482m. Without the levy, it would have made an operating loss of over pounds 700m.