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A rescue plan to avert blackouts that hit 500,000 homes this week was undermined by demands of E.ON, the German energy group, that National Grid pay double the usual price for an emergency electricity boost, The Times has learnt.
National Grid’s decision not to use E.ON’s oil-fired plant on the Isle of Grain in Kent, which was available, followed a dramatic rise in wholesale energy prices and may have contributed to the disruption on Tuesday, industry sources say. National Grid is preparing a detailed report on the incident for Ofgem, the industry regulator, which has threatened to initiate a formal investigation.
Ofgem is expected to seek answers to a number of remaining questions about the shutdowns, which National Grid acknowledges represented the worst disruption to Britain’s power grid since 1987.
The Timesunderstands that National Grid contacted E.ON about midday on Tuesday, soon after technical glitches led to the unplanned loss of two of Britain’s biggest power stations, Sizewell B in Suffolk and Longannet in Fife, resulting in a 1,510-megawatt shortfall in supply.
It requested that the E.ON plant at the Isle of Grain be readied to help to plug the gap. The plant was ready for use in a little over half an hour and could have delivered 650MW of power to the grid immediately.
Traders said that E.ON sought prices of £950 per megawatt hour from National Grid for power from the Isle of Grain plant while other suppliers were offering prices at less than half this level. However, prices from rival suppliers also quickly shot up and National Grid finally opted to buy power from RWE npower’s plants at Fawley in Hampshire and Littlebrook in Kent for about £850 per megawatt hour.
The prices were still far above the usual market price of about £40 to £60 per megawatt hour. One source pointed out that prices even higher than this were not unheard of in the UK power market. National Grid is understood to have bought power at prices of as high as £1,500 per megawatt hour from the Grain plant in the past at moments of peak demand.
A hydropower plant at Dinorwig in Snowdonia, North Wales, known as Electric Mountain, was also brought into service on Tuesday, although it is not known at what price.
National Grid insisted yesterday that the steep increase in wholesale prices demanded by E.ON to use the plant was not a factor in its decision. It claimed that the Isle of Grain plant simply was not available in time to help to resolve the situation.
An E.ON spokesman said: “Grain is a very expensive plant to operate because it runs only occasionally.” He pointed out that runaway oil prices, which reached more than $135 this month, had added to the cost.
Although it is normal for wholesale electricity prices to soar at moments of acute demand and the prices charged when power plants are brought into use at short notice generally reflect this, the hugely inflated prices have stoked accusations of profiteering.
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This government, with burdened by its CND past is playing 'chicken' with our power supplies just as it has done with NHS beds. Only now are they rushing into nuclear, wind and wave and solar power etc.
Whitehall will be praying that we do not get a power cut in July.
Dr H M Buckland, Grimsby, UK
If other operaters were offering half the price of E.ON and then suddenly there prices shot up to match E.ON then it seems to me energy compainies are in collusion to fix prices
gary scales, london, england
It makes me die with laughter reading all of those who hanker for the "good old days" of nationalisation. Those were the days of the three I's. (Sorry wrong use of apostrophe but no other way to show it) Inefficiency, Incompetence and Isolation from the real world!
Grow up guys!
Brett, Tunbridge Wells,
We are led by donkey's and fleeced by profiteers
V Brooker, Wallington, Surrey
We should embrace the joys of allowing our vital services to be multicultural.
Mr Brown has shown us time and again how we benefit from allowing foreign entities to own our gas and electricity companies.
The very thought that foreign companies are cheating British consumers leaves me cold.
hirry ewal, exeter, england
I surely hope that this is a wake up call to all those in Government that sitting on your hands not wanting to take difficult decision is a sure way for disaster.
This is a result of the dash for Gas of the 1990s & no plan to build new power stations to replace the ageing fleet.
Alistair, Leicestershire,
MarkS Leeds - the fact that your electricity prices doubled probably means that you were on a very cheap business contract for the past few years that has just expired. So 2 tips a) check what's happened in the world of enegy in that time and b) read your contract properly regarding notice!
John Smith, Warrington, Cheshire
Matt, true enough it was not the current government who privatised the electricity industry, but it was the current government who permitted, if not encouraged, the sell out of the British owned private companies in the interests of "European integration" aka abject surrender .
D.L. Stehens, York, England
This has now become a matter of national security.
Chip, London,
Back to the horse and cart, oil lamps and candles. We are told to expect higher prices for food and energy, is that to allow these industries to make enermous profits.Just changing parties in goverment won,t make this go away, its up to the electorate to make sure that the goverment listens.
David, Helsinki, Finland
Private companies failing to sell is not in their best interests. It's daft to say foreigners don't care whether the lights are kept on, I promise you they do are about money, and the two are synonymous - no lights, no profit. The CEGBs used the buy-out pricing system as well, that's not the problem
Jane, Nottingham,
This Government decommissioned Nuclear power stations costing Billions. So reliance on fossil fuels (oil,gas, coal) wouldn't be a risky strategy: Come On. 10 yrs on, suddenly Nuclear Power does have role, billions wasted and more billions to spend catching up. Knee jerk politics costing us every way
Athar, London, UK
There is something very very wrong with the energy market - and I'm not talking about oil.
There appears to be a cartel operating. nPower has just
doubled our electricity price but of course did not tell us until AFTER the 90 day notice period to change suppliers had passed.
It stinks.
MarkS, Leeds,
Remember California when the electricity suppliers were privatised. Expensive secondary generators purchased by the geek companies. Whole area at the mercy of the new owners. Sounds like Britain, now at the mercy of German companies who own EON and PowerGen.
JANE FLEMING, Whittlesey, UK
We should Renationalise the basics of life we can not live without, power and water should be owned by Britain and operated by the government otherwise we are just giving our resources away to the other countries.
joe, Edinburgh, Scotland
Some unrealistic posts (the Tories won't change the regime, renationalise? : that's barking! and Giles infers more than the piece states). Think about whose interest would it be to leak this information? The market players perhaps who profit from the current regime? All is never as it seems.
Occam, Solihull, UK
Nationalisation is not the key - global experience will show you that. The fact that prices reach this high is the signal for more investment - you destroy those signals and you destroy any chance of proper investment. Best plan: privatise the world wide oil industry to lower oil prices.
robert arbon, London,
The nationalised Central Electricity Generating Board (CEGB), which integrated both generation and grid distribution, had a statutory duty to "keep the lights on" - the private companies don't! After nearly 20 years since privatisation the whole system is falling apart - surprised? Not at all!!!!!
Tony, Bristol,
0.5Mil homes is not a lot of power and peak units do cost a LOT more to operate than baseload facilities... end result... so what?! National Grid is just the balancer/operator and owner of the system, if it can't afford the cost then it should pass the cost on to those causing the failure beyond FM
Giles, London, UK
The market must have high prices during short term shortages as this is currently the only incentive to build new fast response plant. There is no capacity payment. By 2015 Grain, Littlebrook and Fawley will close (LCPD) and greater wind power plus larger nuclear units will require more reserves.
Steve A, Solihull,
I remember that when Gas, Electric and Water was owned by the state there was a general feeling of it belonging to us, the people. Now it's private they don't.
I pay a water rate and since privatisation I have NEVER saved a drop of water because I pay the same either way.
Dave Kinsley, Derby, UK
Why didn't the National Grid buy power when it was offered at less than half the price that E.ON was seeking? seems their failure to act quickly in a fast paced market ending up costing over £375 per megawatt hour.
Giles, Singapore, Singapore
Renationalise, renationalise, renationalise.The three 'R's which government has got to learn.
Paulus, London , UK
I really don't think you can blame the Labour government for the power industry being in private, foreign hands as they weren't the ones who sold it off with promises of greater competition, more choice and lower prices for consumers. Can someone remind me who did that?
Matt, Nottingham,
That's the free energy market for you. Opportunist behaviour is quite likely when the customer has no other options. We need to develop those options now, and forget the Labour doctrine of do nothing and hope it will all work out OK.
colin, Shrewsbury UK,
One thing that can be truly laid at the door of the Labour Government is its complete and utter failure over the last 10 years to plan energy security. There has been a window of opportunity to plan for the future which has been missed and now Britain is almost completely in the hands of foreigners.
John, Manchester,
11 years of Labour government,and how many nuclear power stations have been built, to replace antique stations? Yep : zero. Incompetence is not the word. We are hostage to imported fuel,rising costs,strikes and sell-outs to other nations. Crisis? What crisis? as Callaghan was reputed to have said.
David, Oxford,