Orcadians will not be hit with a massive increase in their electricity bills, according to power bosses, despite recommendations to drop the subsidy which keep the prices down.

This follows the announcement this week that the grant provided by Scottish and Southern Energy known as the "hydro benefit" will be removed.

The energy regulator Ofgem has been advised the package may not be compatible with European legislation and it intends to remove the benefit subject to consultation.

John Hanlon, chairman of energywatch Scotland, said the organisation wanted to be involved in developing approaches that would minimise the impact on consumers in Scotland.

"I also ask that Scottish and Southern Energy do not rush to bring in price rises. I urge them to give the Minister time to see what can be done before they consider taking that step."

A spokesperson for Scottish Hydro Electric, however, claimed that bills will not be affected at all.

He said: "The general view is that this is unlikely to affect electricity bills at all. Very quickly after the announcement was made the Department of Trade and Industry said they were looking at options for finding an alternative mechanism for keeping electricity bills down.

"Hydro benefit will continue for 18 months and something else should then be put in place."