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Media Releases
2006

16 March
2006

EU ruling boost for power generators and their suppliers

A new European Commission ruling is set to increase opportunities for businesses to win supply contracts with Great Britain's major electricity producers.

The Association of Electricity Producers (AEP), working closely with advisors Shepherd and Wedderburn and Gantt Consultancy, has persuaded the Commission to exempt power generators in Great Britain from the Utilities Procurement Directive which imposes strict rules on the letting of contracts by companies in the water, energy, transport and postal sectors.

The exemption, which covers generators in England, Scotland and Wales and is shortly to be published by the European Commission, is the first to be granted by the Commission for any sector in the European Union under the Directive - which was only implemented in the UK in January of this year.

AEP chief executive, David Porter, described the decision as a significant breakthrough and said his members could now look forward to a reduction in time-consuming red tape:

"We are delighted that the Commission has accepted that the GB generation market is fully competitive and should no longer be subject to the Utilities Directive. The EU procurement rules, though well-intended, imposed unnecessarily heavy burdens and delays on power generators and are inappropriate for the liberalised market in which our companies now operate," he said.

The EU procurement rules are designed for public sector and utility companies operating in protected markets, which might be inclined to favour local or national suppliers rather than procure goods and services on a competitive basis.

"However, electricity producers in the GB market have a strong commercial incentive to purchase supplies as economically as possible because of the competitive pressures they face," added Mr Porter.

"In practice, the procurement rules have put generators at significant commercial risk, particularly when timescales were tight, and added up to six months to the procurement process.

"Compliance with the rules up until now has involved considerable cost and administrative burdens."

Shepherd and Wedderburn partner, Richard Cockburn, who led the AEP legal team, said the decision would have benefits for all companies operating in the sector. "Whilst the big companies will benefit from time savings, small to medium sized businesses across the country are also more likely to get involved in the tendering process as a result of the relaxation in the rules," he added.

"We have been working with the AEP for two years on the project and one of the key elements in reaching this point has been the fact that the GB industry is now fully competitive."

"The complexity of the procurement processes previously mandated by the EU may have discouraged smaller businesses from participating and so the exemption is good news for all concerned."

Mr Cockburn expects organisations operating in other sectors of the electricity industry, as well as those involved in the gas sector, to look closely at the new ruling and its implications.


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