UK electricity and gas regulator Ofgem issued proposals Wednesday to include Scotland in an electricity trading scheme covering all of Great Britain, which it says, could be implemented by 2004.

Reforms to the wholesale electricity market in Scotland will bring the same benefits to Scottish electricity customers as those enjoyed by their counterparts in England and Wales – but will need Government legislation to implement, said Ofgem.

Wholesale prices make up half of domestic customers’ bills. Following the introduction of New Electricity Trading Arrangements (Neta), these prices fell by 20-25 per cent in England and Wales, a fall which will feed through to domestic bills.

Proposals to introduce British-wide Electricity Trading and Transmission Arrangements (Betta), will create, for the first time, fully competitive market arrangements in Scotland. These proposals, based on Neta, will not only bring the benefits of competition to Scottish customers but will also give Scottish generators greater access to markets in England and Wales.

Ofgem Chief Executive, Callum McCarthy, said, “While competition in the Scottish retail market is established, the same cannot be said of the wholesale market. Betta reforms will benefit Scottish customers and Scottish electricity companies. By creating a wider and more competitive British market for electricity generation, Betta reforms will also benefit customers and companies in England and Wales.”

“While the current arrangements in Scotland may have been right at the time of privatization, they are now more of a hindrance than a help to the development of a truly competitive Scottish electricity industry.

“Ofgem is working with the companies, the Governments in London and Edinburgh and others to bring in these changes which have wide support. The changes are far-reaching and require primary legislation.”

Currently in Scotland, ScottishPower and Scottish and Southern Energy are responsible for the generation, transmission, distribution and supply of electricity – a situation which has remained largely unchanged since privatization in 1989. By contrast, the wholesale market arrangements in England and Wales are far more dynamic and are based on the Neta model, which was introduced in 2001.

Ofgem’s GB-wide proposals will address a number of issues, which are hindering the development of the electricity industry in Scotland. These include:

– Giving greater access to a GB market for Scottish electricity which exceeds national demand by about 70 per cent

– Creating a market to cope with the end of the Nuclear Energy Agreement (NEA) in 2005 at the latest. The NEA was set up at privatization and means that British Energy’s Scottish output has to be sold to the two Scottish energy companies – Scottish Power and Scottish & Southern Energy

– Creating a wider British market for renewable generation which is receiving major Scottish investment.

The proposals will bring:

– a single operator of the British electricity transmission system

– a right of access on fair and competitive terms to the Scottish transmission network for companies throughout Great Britain, and

– a single set of arrangements for the real time balancing of the transmission system and for settling the cost of balancing.

Because of the need for legislation, it will not be possible to introduce Betta until 2004 at the earliest. However, much of the work needed for implementation has been achieved under the Neta project and the costs to both industry and Ofgem will reflect this.