Britain’s wholesale electricity markets are a curious world of acronyms and codenames, of “NISMs” and “spinning reserves”.

But while participants may speak a language largely impenetrable to most of us, their activities were brought into sharp focus yesterday as details of the supply shutdown that led to blackouts in 500,000 homes began to emerge.

When an unexpected shortage of power occurs, it is the job of National Grid to restore balance across the network - by cutting supplies to large customers to reduce demand, or by requesting that power companies bring extra generating capacity online by issuing coded warnings to the market.

The most common of these is known as a Notification of Insufficient System Margin (NISM). Seven of these were issued last year, but the shortfall on Tuesday was so acute that the warning was several notches higher, known as a Demand Control Imminent (DCI) warning.

This was a clear request to the market urgently to bring on extra power from stations that were either idling or on standby. Within hours, several of these were brought into service, helping to relieve pressure on National Grid before the evening demand peak, which yesterday reached around 41,000 megawatts.

Specific information about the status of individual power stations is an industry secret, because it can be used potentially to earn profits. Individual power plants are therefore referred to in the power market by codenames. “It is commercially confidential because it affects the price of electricity,” a National Grid spokesman said. A company whose own power plants are known to be out of service could be forced to pay more on the wholesale market, for example.

While there has been no suggestion that the incident this week was caused by anything more than a series of glitches, there are good reasons for maintaining such confidentiality.

Last month, the industry regulator Ofgem began an investigation into an alleged incident last autumn when Scottish Power and Scottish and Southern Energy (SSE) took a number of power stations in Scotland offline for maintenance.

Normally, Scotland exports 20 per cent of its power supply to England, but the reduction forced National Grid to import electricity from England. The shortfall was so acute that power lines running between the two countries became overloaded, forcing National Grid to buy at high prices from Scottish Power and SSE, which brought their plants back on line to meet demand.

National Grid was forced to pay as much as £750 a megawatt-hour for wholesale electricity in the Scottish market, up from as little as £40 under normal circumstances. Over a three-week period, National Grid is believed to have paid out more than £10 million extra.

The investigation will focus on whether the incident represented an abuse of a dominant market position and whether the plants could have been taken offline deliberately to inflate prices. Scottish Power and SSE have firmly denied allegations of market abuse.

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