MMC to focus on water and power monopolies: Price control will be likely area of investigations

PRIVATISED utilities such as water and electricity are likely to be the focus for investigation by the Monopolies and Mergers Commission this year, its chairman, Graeme Odgers, forecast yesterday.

Disagreements between the two utilities and their regulatory watchdogs over forthcoming price control reviews was likely to result in the MMC being called in to adjudicate, he said.

The water industry regulator, Ofwat, has to set new limits on the proportion of environmental costs the privatised water companies can pass on to their customers - the so- called K factors.

Meanwhile, the electricity watchdog, Offer, is gearing up for a review of the price caps governing the 12 regional electricity companies in England and Wales and the two privatised Scottish power companies.

Professor Stephen Littlechild, director-general of electricity supply, is also considering whether to refer the two privatised generators, National Power and PowerGen, to the MMC.

Mr Odgers, who took over at the MMC last April, said: 'It could well be that disputes might occur that would want to be resolved at the MMC.'

The last big MMC investigation of a privatised utility was its report into British Gas, published in August.

The Government largely ignored the MMC's key recommendations that British Gas be broken up into separate trading and distribution businesses but that it be allowed to maintain its domestic monopoly until 2000 at the earliest. The commission is yet to be called on to investigate BT.

Mr Odgers also ruled out for the foreseeable future the idea of holding its inquiries in public.

He was speaking as the MMC published its annual review for 1993. This reflects the commission's increasing concentration on investigation of monopolies rather than mergers. Of the 15 reports published last year seven concerned monopolies and only five involved mergers.

A further seven monopoly reports on subjects ranging from contraceptive sheaths and music to cinema films and property valuation are either awaiting publication or still in hand.

Ofgas is relaxing the British Gas price control formula from 1 April 1994, so that domestic and small customers will pay more, writes Mary Fagan. The change is less beneficial for British Gas than the company had hoped but has caused outrage among consumer groups.

The formula, which limits price increases to inflation minus 5 percentage points, will be eased to RPI minus 4 to compensate British Gas for loss of market share.