July 17, 2014 / 11:26 AM / in 4 years

UPDATE 1-UK to change competition rules to boost power sector investment

* Government wants to amend unbundling rules

* Plans to have new rules in place by early 2015 (Adds more detail)

LONDON, July 17 (Reuters) - The British government plans to change competition rules to help attract investment to electricity generation and the grid, the Secretary of State for Energy and Climate Change said, as it seeks to replace ageing plants and keep the lights on.

Britain’s current so-called unbundling rules prohibit the same company from investing in both energy generation and transmission networks at the same time.

The government said it plans to scrap these rules to widen the scope and enable more companies to invest in energy infrastructure in Britain.

“These rules were designed for good competition reasons, but over-rigid interpretation is stopping infrastructure investment that could not possibly result in any discriminatory behaviour,” Ed Davey told a Confederation of British Industry conference.

Britain’s energy sector attracted 45 billion pounds ($77 billion) of investment between January 2010 and December 2013. Investment in renewables totalled 8 million pounds last year, according to a government report released on Thursday.

The government has said, however, that around 110 billion pounds of investment in energy infrastructure is needed to replace ageing coal and nuclear plants and prevent power shortages into the 2020s.

Davey said he had written to the chairman of British gas and electricity market authority Ofgem about amending the unbundling rules.

Any changes would still meet the requirements of a European Union directive on unbundling, he said in the letter.

The government will work with Ofgem on amendments this summer so that the new rules can come into force in early 2015, he added.

The government also said on Thursday it would provide the first 10 million pounds this year out of a 20 million pound energy reduction auction scheme to businesses and industry.

Under the scheme, businesses such as airports, hospitals and supermarket chains will compete for funding for projects that reduce electricity demand as well as carbon dioxide emissions.

Projects have to be able to deliver at least 100 kilowatts of energy savings through the peak winter season. ($1 = 0.5846 British Pounds) (Reporting by Nina Chestney; additional reporting by Susanna Twidale; Editing by David Goodman and Jane Baird)

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