Corp-Ethics.com - Report: Threat of $20m fine for Blackouts

Company	National Grid [Company Info]
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Date	Issue	Title
10th Jan 2005	Other Issue	Threat of $20m fine for Blackouts

Report

National Grid, the firm in charge of supplying electricity to England and Wales, could face fines of up to $20m (£12m) a year in the event of major power cuts.

Regulator Ofgem announced the penalties as part of an incentive scheme to improve the firm's record on blackouts.

The move follows Ofgem's investigation of two large power cuts in the South East and West Midlands in 2003.

The watchdog blamed poorly installed equipment for the blackouts that took place in August and September 2003.

However, it did not impose a fine because it said the National Grid company had not breached its legal obligations.

In the first power cut 476,000 customers lost power for 37 minutes, causing 60% of the London Underground network to close and stranding 250,000 rush hour passengers.

A week later a 42-minute blackout affected 220,000 customers in east Birmingham.

In an attempt to improve National Grid's performance, Ofgem has now unveiled an incentive scheme which will enable the company to raise an extra £8m from its customers - generators, suppliers and large firms - by reducing power outages.

However, if the network experiences major failures National Grid will be forced to cut its bills by as much as £12m a year.

"It was clear from our investigation into the London and Birmingham power cuts that strengthening theincentives on NGC [National Grid Company] to maintain and improve the performance of the National Grid would help protect customers' interests," Ofgem chief executive Alistair Buchanan said.

"Under the new incentive scheme NGC could face penalties of over £10m if we were ever to see a repeat of the blackouts in London and Birmingham in 2003."

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