THE chairman of ScottishPower has questioned the high level of
investment planned for new generating capacity since the electricity
supply industry was privatised.
Sir Donald Miller pointed out yesterday that, at the last count, some
22,000 megawatts of additional generating capacity had been proposed.
Opening a Financial Times conference on the electricity industry in
London, he asked: ''Are the peculiarities of the England and Wales
generation market attracting more investment in new plant than can be
properly justified?''
He also raised concern over the problem of price volatility in the new
market for power. The power pool mechanism now lies at the heart of the
new competitive market for electricity south of the border.
A number of major industrial power users, such as ICI, have become
increasingly critical of aspects of the pool in recent months. A
particular target has been volatility in the pool price, which changes
every half hour.
These questions cannot be ignored, Sir Donald told his audience. He
went on to propose one alternative based on competitive bids for
capacity and energy. ''Such a system could be expected to give greater
transparency of the bidding process,'' he said.
Sir Donald said competition in electricity supply is feasible,
entirely practicable, and of benefit to the customer. But, although
ScottishPower is an active participant in supplying the pool and is a
partner in a scheme to create additional generating capacity in England,
its chairman left the clear impression that he shares some of the doubts
about the way the present structures are developing.
Pointing out that the industry regulator Professor Stephen Littlechild
had recently expressed similar concerns about the pool, Sir Donald
wondered about ''the part played by a pricing system in which generators
have to recover their fixed costs out of the half-hour pool purchase
price''.
He said that, of the 22,000 megawatts of additional capacity planned,
up to 9000 megawatts were already committed. Part of the investment
rationale, he went on, was that new gas-fired plant offered an economic
means of meeting new emission limits. Another factor was regional supply
companies in the south insuring themselves against rapid movements in
pool prices.
''Perhaps one of the questions we should consider . . . is whether
these defects are endemic under the present pool bidding system,'' he
went on.
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