UPDATE 1-Regulator probes 2 UK power grids on Christmas blackouts

Thu Mar 6, 2014 9:33am EST

LONDON, March 6 (Reuters) - British energy regulator Ofgem has launched an investigation into local power grid operators Scottish and Southern Energy and UK Power Networks over their poor performance during blackouts caused by storms last December.

Two million Britons were left without electricity over Christmas, some of them for days, after severe storms caused extensive damage to electricity cables and power transfer sub-stations.

An Ofgem review of the incidents showed on Thursday that SSE and UK Power Networks, partly owned by Hong Kong's Cheung Kong Group, performed much worse than their competitors in trying to restore supply to their customers.

"We are very concerned with the variations in the effect of the storms on customers in different areas," Hanna Dixon, senior partner for distribution at Ofgem, said in a statement.

If the investigation shows THAT the companies have breached their licence conditions, Ofgem could impose a financial penalty, the regulator said, without giving details.

The investigation is expected to end in July.

"We are confident that, once the impact of the storm on our service area is taken into account, our performance over Christmas will stand up well to scrutiny," said UK Power Networks Chief Executive Basil Scarsella.

He admitted shortly after the storms that his company's response to the crisis had been too slow, blaming staff holidays.

SSE restored power to over 97 percent of its customers within two days but was "not complacent" about its performance and was looking at ways to improve communication with customers, said Mark Mathieson, the firm's managing director of networks.

Ofgem said that more than 500 SSE and UK Power Networks customers were still without power supply after five days and that one in five of the customers calling their help lines hung up before speaking to an adviser, suggesting they had been placed on hold for too long.

Ofgem's report showed that power companies were bracing to make compensation payments. Around 26,000 customers across Britain may be entitled to a share of 2 million pounds ($3.35 million) in compensation claims, 67 percent of which is expected to be paid by SSE, the report said.

UK Power Networks and SSE have already promised to increase compensation payments to their customers.

December 2013 was Britain's most stormy December on record, with three separate storms causing most of the damage on power networks.