UK Industry Celebrates NETA’s Second Birthday

Press release issued 27 March 2003

Industrial energy consumers have good reason to celebrate the impact of the New Electricity Trading Arrangements (NETA) launched two years ago.

Commenting, Jeremy Nicholson, EIUG’s Director, said: “EIUG supported reform of the original, flawed electricity pool, which was vulnerable to manipulation by a handful of generators and resulted in unnecessarily high prices to customers. The evidence shows NETA’s sponsors, DTI and Ofgem, can be pleased with their reforms.”

As expected, NETA reforms have helped lower wholesale prices, which are now close to those in continental markets. Energy-intensive industries, which spend well over 1bn on electricity each year, are at last benefiting from broadly competitive electricity prices. A number of problems remain on the demand side and for small generators, which are being addressed, but NETA nevertheless represents a significant net gain for electricity buyers.

Electricity Prices (80MW Demand)	UK	France	Germany	Belgium
Q4 1999 (pre-NETA)	3.25	2.15	2.34	2.31
Q4 2002 (post-NETA)	2.51	2.34	2.95	2.75

Data: Energy Advice Ltd. – all figures in p/kWh (contracts as found, excluding taxes)

Notes:

1. NETA reforms have helped reduce wholesale prices by around 40%. Contract prices to industrial consumers have typically fallen by around 25% as a result, although the benefit of this has been partly negated by the impact of the government’s Climate Change Levy.
2. Contrary to popular belief, UK industrial energy prices are not low by international standards. Contract prices for electricity are currently broadly competitive with most EU competitor economies, though notably above those in France.
3. EIUG represents the energy intensive sectors that produce essential materials like steel, aluminium, chemicals, paper, glass, ceramics, etc., which compete in international markets and depend on secure, competitive supplies to remain in business.