United Kingdom

United Kingdom

Plans to americanise UK pool

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A new model for electricity trading to replace the existing electricity power pool in England and Wales has been dubbed "the proposal of a Dictator General." Electricity Regulator Stephen Littlechild drew the stinging rebuke from the Association of Electricity Producers (AEP) after he published interim conclusions for a new trading arrangement.

Littlechild favours a system more akin to those in other commodity and energy markets. The arrangements he proposes have four main components, each with a different time frame: a forwards market, from a year or maybe more ahead of delivery; a short term bilateral market operating between one day to four hours ahead of each trading period; a balancing market operating from four hours ahead; and a settlement process for imbalances. The system operator -- currently the National Grid Company -- would balance the system and maintain security of supply.

But Graham Thomas from the AEP criticises Littlechild's proposals as ignoring views of generators who wanted a day-ahead auction. And the powers proposed for the regulator mean he could dictate market changes, warns Thomas. What is more, the plans do not guarantee a transparent reference price. This is crucial for small and renewable generators who rely on transparency more than other larger generators, he says. The AEP also points out that the proposals introduce "electricity wholesalers" for the first time. "It's a middleman's charter," he says. "Small generators and small customers will be trampled in the stampede of brokers, wholesalers, lawyers and consultants trying to get their slice of the action."

The association remains unconvinced that the present Pool should be abolished so soon, saying it is much simpler than Littlechild's proposal. It warns against forgetting the great successes of the present arrangement; these include a diverse, world class generating sector, and a more than 30% reduction in customer prices.

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