ScottishPower starts court proceedings over Nuclear Energy Agreement

ScottishPower plc has commenced court proceedings against British Energy and Scottish and Southern over the pricing of power the utility is contracted to buy through the Nuclear Energy Agreement (NEA). ScottishPower withdrew from negotiations at the end of last week after failing to establish the effect of the new electricity trading arrangements (NETA) on the NEA.

ScottishPower has issued a summons through the Court of Session in Edinburgh and expects the case to come to court in about four week’s time. They are seeking a ruling from the courts that the price review procedure set out in the NEA should be invoked as a result of the introduction of NETA or, failing that, the NEA has been frustrated by NETA.

The Scottish NEA has been in place since 1990 when ScottishPower was privatized. It requires ScottishPower to purchase about 75 per cent of the power produced by British Energy’s two Scottish nuclear generators, at Hunterston and Torness, until 2005 with the price pegged to wholesale rates prevailing in England. With the introduction of NETA, ScottishPower is concerned that the arrangement will become uncommercial and that they will be forced to purchase power at prices above those available in Scotland.

A spokesman for ScottishPower said, “The key issue to resolving this dispute was the setting of a fair market price. ScottishPower had sought a negotiated settlement for 18 months but unfortunately is left with no option but to seek the help of the courts.”

ScottishPower is the largest individual customer of British Energy. In a statement issued yesterday, British Energy argued that the NEA has not been frustrated. The company believes that the introduction of NETA is not one of the specified circumstances entitling any of the parties to rely on the price review procedure.

British Energy has indicated that it would be happy to continue discussions with both Scottish Power and Scottish and Southern Energy on establishing the appropriate way of agreeing future pricing under the NEA. British Energy is prepared to contest the action. In its statement it said, “Should Scottish Power continue with legal action we are confident the court would find in our favour.”

Under the NEA, Scottish and Southern Energy is also contracted to purchase the output from the two power plants. Scottish and Southern Energy, which is also named in the summons, said it was still seeking an agreed solution with British Energy and Scottish Power.

The news of the breakdown in negotiations and commencement of legal proceedings comes ahead of tomorrow’s announcement of annual results from ScottishPower plc.

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