Electricity prices 'unlikely to fall' under Neta this year

11 April 2001
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12 April 2001 | Liam O'Brien

Electricity prices will remain firm for the rest of the year despite the introduction of the new electricity trading arrangement (Neta) on 27 March, energy experts predicted this week.

Neta's introduction was hoped to lead to further cuts in companies' electricity bills as its system of competitive tendering for business replaced the old one-price pool system. But the deep discounts that have been negotiated in anticipation of Neta mean there is little room for further cuts.

Electricity buyers reckon that the baseload electricity price of £19 per megawatt hour quoted in the days following Neta's launch is close to the marginal cost of producing it.

"There have been pretty hefty reductions in each of the previous negotiation rounds," said Chris Partridge of energy analysts John Hall Associates, "so there is no more fat left on the bone. Suppliers can't cut their prices any further."

Martin Rawlings, vice-chairman of CIPS's energy committee added: "Electricity prices are now 30-35 per cent down on what they were at this time in 1998. A lot of people are saying it is extremely unlikely they will fall any further."

Kevin Murray, corporate purchasing manager for Carlsberg-Tetley Brewing, said he expected electricity companies would be more concerned with covering their exposure to the new market conditions rather than offering more price reductions to their customers.

"Neta will need to bed in before there are more price reductions," he predicted.

SMapr2001

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