Grid faces £1bn London blackout fine

NATIONAL Grid could be fined up to £1 billion after the massive power failure that brought much of central London to a rush-hour standstill.

And Grid directors could lose millions of pounds in bonuses as a result of the catastrophic blackout, which paralysed the capital's transport system.

The penalties will be triggered if the company is found to have breached its licence by not maintaining the electricity grid to the required standard.

Chief executive Roger Urwin, who earns £924,000 a year, including a £324,000 bonus, admitted that part of his and the board's pay package was geared to the National Grid's ability to deliver power around the country.

He told Financial Mail that if an internal inquiry concluded that it was the fault of management, he and five fellow board members would lose out financially. But Urwin, 56, whose pension-fund of £6.3 million already guarantees him an annual income of £370,000 when he retires in four years' time, is confident that the board will be cleared.

Industry regulator Ofgem has decided to launch its own inquiry into the events that led to tens of thousands of passengers being trapped in Underground trains.

Ofgem chief executive Callum McCarthy said: 'Ofgem is seeking information from the National Grid Company and the firm will be providing a report to both Ofgem and the Department of Trade and Industry.

'In the light of this and our own investigation, we will consider if National Grid carried out its legal obligations to maintain the grid to the required standard.'

If the Ofgem report concludes that the National Grid broke the terms of its licence, it has the power to levy a financial penalty of ten% of the company's annual turnover of £9.4 billion.

Urwin insisted that the power failure was caused by two faults in quick succession on the National Grid. He rejected suggestions that a failure to invest was an underlying cause of the power breakdown.

National Grid had invested a record £3.5 billion in the network in the past three years, he said.

The battle for Drax is expected to intensify this week following yet another bid for Britain's largest power station.

American investment house Miller, McConville, Christen, Hutchison & Waffell (MMC) entered the fray on Friday with a formal bid.

Drax, which produces seven% of Britain's electricity, has £1.9 billion of debt and is already in talks with US bankers Goldman Sachs, energy giant International Power and mining group BHP Billiton.