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Britain's energy regulator proposed new rules to combat electricity theft on Wednesday, revealing that up to one-third of electricity stolen each year is used to power illegal cannabis farms.

"Theft of electricity increases the costs paid by customers and can have serious safety consequences," Chiara Redaelli, an economist at the regulator, Ofgem, wrote in a report on tackling energy theft.

"It leads to misallocation of costs among suppliers that can distort competition, and hamper the efficient functioning of the market," Redaelli said. "It also has links to organized crime, and in particular cannabis cultivation."

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According to Ofgem, up to 25,000 cases of electricity theft take place in Britain each year, costing the industry at least 200 million pounds ($304 million), or around 7 pounds per customer. About one-third of the illegally extracted electricity is used to power the lights under which marijuana is cultivated.

(Read More: Ex-Microsoft Exec to Create First National Marijuana Brand)

Redaelli attributed the high level of cannabis-related electricity theft to the energy-intensive nature of marijuana farming. She said illicit cannabis farms, which run lights 24 hours a day, consumed around 12,000 kilowatt-hours (kWh) of electricity per month, 40 times more than the average domestic consumption of 300 kWh per month.

"This consumption is often not paid for, either because it is unrecorded (because of meter tampering) or because the bill is not paid," she said.

In the report, Ofgem proposed new rules requiring energy suppliers to detect, investigate and prevent electricity theft, or face fines. Ofgem also proposed a theft risk assessment service to target suspicious premises.

"Ofgem wants to make sure that consumers are paying no more than they need to for their electricity, and lives are not put at risk. It's critical that suppliers do all they can to clamp down on electricity theft. This is why Ofgem is introducing new rules to encourage better theft detection," said Chief Executive Officer Andrew Wright.



