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9 July 2003 - London's High Court has rejected the attempt by four power companies to challenge UK energy regulator Ofgem's decision to alter the way generators pay for energy lost in transmission, Ofgem said on Tuesday.
AES Drax, Scottish Power, Scottish and Southern Energy and Teesside Power in April asked the court for permission to seek a judicial review of the way energy regulator reached its decision to go ahead with a system of zonal transmission loss charges, due to launch in April 2004.
They had argued Ofgem's move would hit their revenues and the value of their assets, and that Ofgem had not taken this into account sufficiently when deciding on the changes.
"The decision by the High Court endorses the decision Ofgem took to introduce a fairer and more environmentally friendly way to pay for the electricity lost when it is transported across the country via the National Grid," said Boaz Moselle, Ofgem's managing director for competition and trading arrangements.
The new zonal system is designed to encourage generators to curb transmission losses by building power stations as close as possible to consumers. The further electricity has to travel down the wires to reach consumers, the greater the transmission losses incurred.
England's main centres of power demand are in the south of the country but many of its biggest power stations have historically been built in coal-producing areas of the north.
Under the new zonal scheme, generators in the north will have to pay more toward the overall cost of losses on the grid than generators in the south.
Ofgem said the new system would help cut greenhouse gas emissions by curbing losses and would benefit customers by encouraging generators to be more efficient.
Cost reflective charging for transmission losses is due to come into force in April 2004 in England and Wales. The Department of Trade and Industry (DTI) has stated that it is minded not to include cost-reflective charging when the current wholesale trading arrangements are extended to Scotland.
However, Ofgem said that until there is certainty about the parliamentary timetable for introducing a GB-wide wholesale electricity market it believes zonal losses should be introduced in England and Wales as it must exercise its duties within the parameters of the existing legal framework, a position the High Court accepted as reasonable.
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