RNS No 5915u
OFGAS
10 June 1999


OFFER Publishes Consultation Document on Revised Price Restraints

OFFER today published a preliminary consultation document* that outlines the
issues for consideration during the review of maximum price restraints for each
of the Public Electricity Suppliers (PESs). The present price restraints apply
to domestic and small business customers and are due to expire on 31 March 2000.


The document discusses the operation of the existing maximum price restraints
and asks for views on a number of issues including options for future price
regulation. These include:


- continuation of the existing form of RPI-X price restraints, with the possible
modification to the scope of the restraints and the treatment of generation
costs;


- a system of relative price regulation that links prices offered to certain
protected customer groups to the prices offered to a "marker" group of customers
for which competition is seen to give adequate protection; and


- removal of price restraints from 1 April 2000, and relying instead on
conditions in the supply licences and powers forthcoming under the Competition
Act 1998 to protect customers.


Responses are invited by 9 July 1999. OFFER expects to publish initial proposals
for future price regulation later this year.


NOTES TO EDITORS

1. The present price restraints apply to all domestic customers and small
businesses consuming less than 12,000 kWh per year supplied by the local
supplier. The restraints are in the form of an RPI-X style control on end user
prices based upon a series of cost assumptions about each component of the bill.


2. The principal costs of electricity supply to a typical domestic customer 
consuming 3,300 kWh per year are:

- Generation Purchases                            49 per cent;
- Transmission Costs                               5 per cent;
- Distribution Costs                              32 per cent;
- Supply Costs and Margin                         13 per cent; and
- Fossil Fuel Levy                                 1 per cent.

3. Based on an annual consumption of 3,300 kWh, the typical bill for a standard
domestic customer is #252.


Media Enquiries 
OFFER Press Office: 0121 456 6208/6234/6459
Out of Hours - 01426 174714


                            Joanna Kail              0121 456 6234            
 
                            Out of hours               01426 174714

*Copies of the paper "Review of Domestic and Small Business Electricity Supply

Price Regulation A Consultation Document" are available from the OFFER library

tel: 0121 456 6378/6377.

OFFER Web-site at: http://www.open.gov.uk/offer/offer.htm

Ofgas Press Office - 0171 932 1606/1668
Out of Hours - 0374 728971

OFFER and Ofgas Press Releases can be accessed on the Internet 
at:www.nds.coi.gov.uk


END

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