Power regulator wants tougher curbs

The electricity regulator yesterday called for tougher curbs on the industry and backed the idea of a single body to regulate both gas and power companies. The call came as he prepared to impose further price cuts worth up to pounds 20 off the average bill. Michael Harrison reports.

Professor Stephen Littlechild, the director general of electricity supply, said there was an urgent need for new powers to protect customers and prevent electricity companies abusing their market power.

Among the proposals contained in his submission to the Government's review of utility regulation is a recommendation that the distribution and supply businesses of the regional electricity companies be split and put under separate ownership.

This would prevent the Recs from cross-subsidising their supply businesses when competition for domestic customers is introduced next year. It would also enable individual supply businesses to be taken over or merge with those of other Recs.

Professor Littlechild also called for powers to strengthen transparency and accountability by, for instance, giving him the authority to publish information that the companies have so far withheld from the public domain on the grounds of commercial confidentiality.

His submission also supports the case for merging the gas and electricity regulators into one body. Professor Littlechild, whose pounds 109,000-a-year contract expires in August, 1999, would not say, however, whether he would apply for the job of combined regulator.

Clare Spottiswoode, the gas industry regulator, also supports a merger and has indicated she may not stay on when her current term of office expires next April unless the Government makes a speedy decision.

Professor Littlechild does not rule himself out of the running but he does describe the post of dual regulator as an "onerous job" with a heavy workload.

His submission also comes down against the concept of profit-sharing between shareholders and customers, arguing that this would create uncertainty about future electricity price levels and would be open to manipulation by the power companies themselves.

Professor Littlechild also rejects the idea of replacing individual regulators with regulatory commissions that hold their deliberations in public, saying it could slow the decision-making process.

The President of the Board of Trade, Margaret Beckett, is expected to publish a Green Paper sometime in the New Year setting out how she plans to reform utility regulation. The proposals will take account of responses to the current consultation exercise. The timing of the Green Paper could hold up publication of the Monopolies and Mergers Commission report into PacifiCorp's pounds 3.6bn bid for the Energy Group, which was referred by Mrs Beckett because of concerns that it raised issues which the existing regulatory framework could not handle.

The price curbs due to be announced next week are likely to see electricity bills fall by between 7 and 10 per cent over the two years starting next April. In the first year that would mean a reduction of between pounds 12 and pounds 19 in the average pounds 270 annual bill.

The reductions are in addition to the price controls implemented in 1995 which run until 2000 and will effectively impose a limit on the charges that the 12 Recs can levy on their 23 million customers.

The price curbs will only be set for a two-year period because the hope after that is that competition in the domestic market will dictate prices.

Professor Littlechild believes that competition among suppliers will drive down the price at which supplies are bought from the big generators. At present generation accounts for 52 per cent of the average bill, distribution 29 per cent, supply 6 per cent and transmission 4 per cent.