National Grid denies power ration plans to avert blackouts

National Grid Transco yesterday denied there is any risk of US-style power blackouts in Britain this winter, although it admitted it had written to some of its largest industrial customers to offer inducements for lower usage contracts.

National Grid said there was no suggestion of power being rationed and that such measures were quite common.

The Grid has contacted major manufacturing plants and other heavy power users to offer inducements for accepting so-called "interruptable" contracts where the Grid can reduce supply at 24 hours' notice. Key customers include companies such as the mining group Rio Tinto and aluminium manufacturer Alcan.

A spokeswoman for the company said: "These contracts are nothing new. We used them last year and the year before. They simply offer an interruptable kind of contract, which enables us to free up capacity. We have alternatives on the supply side but this gives us more flexibility on the demand side."

The Grid insisted there would be no problems with power supplies this coming winter. "We're forecasting there is enough generation to meet demand at all times during winter. We have just been looking for a bigger safety net."

Companies likely to take advantage of the offer are those that do not require continuous heat or power in their plants. The contracts can be worth as much as £56,000 an hour to those who sign up.

The electricity market suffered over-capacity a few years ago but this came to an end when the Government introduced the New Electricity Trading Arrangements. This meant that generators had to trade power in a market system with the result that the price soon fell by 40 per cent.

This has caused major problems for generating companies. TXU, the American-owned power company, collapsed last year. The nuclear generator, British Energy, has also faced serious financial problems.

Companies start their annual negotiations to renew their power contracts from October onwards. It is thought that many firms are expecting renewal prices up to 30 per cent higher than last year.

Experts have expressed concern that these increases will add significant pressure on Britain's already beleaguered manufacturing sector.