Comment: Wallis goes and spoils it for everybody else

And then there were five. Or very nearly anyway. In the absence of a last-minute hitch, PowerGen will, by early next week, be in a position to make an agreed offer for Midlands Electricity, the fifth such bid among the privatised regional electricity companies to have occurred this year. Though many of his institutional shareholders might doubt his sanity, Ed Wallis, chief executive of PowerGen, seems determined to push ahead with an offer that may be the straw that breaks the camel's back and call a halt, for now, to the feeding frenzy of bids among the RECs.

With at least another two bids in the wings, plus the likelihood of a counter offer from Houston Industries for Norweb, ministers have had about enough. As if the embarrassing frenzy of activity were not enough, the whole thing has been accompanied by an insider-dealing spectacular that would put even Ivan Boesky to shame. In nearly all cases, the bids have leaked like sieves as City advisers scramble in an unseemly, and sometimes vengeful fashion for the business.

There are reasonable public policy grounds for referring to the Monopolies and Mergers Commission both the PowerGen bid for Midlands and the North West Water bid for Norweb. With the regional electricity extravaganza now completely out of hand, ministers will find it hard to resist grabbing them. But first the case against interference. By keeping supply, distribution and generation separate and ring-fenced, Ed Wallis would argue - with suitable safeguards to guarantee transparency of accounts - it would be possible to circumvent any concerns the regulator might have about combining all three aspects of the electricity industry under one roof.

Ummm. Perhaps if PowerGen had been first out of the starting blocks in bidding for a regional electricity company, ministers might have still been asleep enough to have bought this arguement. Not today, however. The Scottish Power bid for Manweb, if the truth be known, escaped reference only by the skin of its teeth, and there were far less challenging issues of vertical integration, loss of comparitors etc, involved in that offer than there are in the PowerGen move. It hardly seems likely that a Government which separated generation from supply and distribution as a deliberate act of policy is now going to allow them to reunite once more without so much as an MMC inquiry.

Furthermore, though this is not necessarily something for ministers, if the businesses are going to be kept as separate as Mr Wallis is promising regulators, you have to wonder what the point of doing the deal is in the first place - other than management aggrandisement and the hope that it might help the company in overseas markets.

PowerGen will be able to exploit some obvious contradictions in the Government's position to further its case. Just look at this neat little trick, for instance. To coincide with the bid, PowerGen is planning to answer demands from the regulator that it dispose of generating plant by selling some of its power stations to Eastern Electricity. If Eastern is allowed to combine distribution with generation, why not PowerGen too?

One of the advantages of being in Government, however, is that you are not obliged to be consistent in your decision making. PowerGen and its advisers are being naive if they think Ian Lang, president of the Board of Trade, is going to be bound by the precedent of past, even very recent, decision making. He will act as pragmatically as the politics require. Certainly ministers believe they owe Mr Wallis no favours whatsoever, a chief executive whose inflated bonuses and options have done as much as any to bring the privatised utilities into disrepute. The same goes for North West Water's bid for Norweb. It is not hard to find a reason perfectly consistent with Government thinking for referring this bid - concentration of purchasing power in the region being just one. In takeovers, as in all forms of excess, there is always the deal to far, the one that spoils it for everyone else. PowerGen's proposed bid for Midlands is it.