Bravo for our pressure-resistant energy regulator

Now that British Energy – supplier by nuclear generation of almost a quarter of this country's electricity – has declared that it may shortly become insolvent, all the main players in the industry are trying to escape the blame and point the finger at somebody else.

But because this is power stations and not trains, because it is British Energy rather than Railtrack and because the lights still go on when we press the switch – we probably won't bother to follow the matter closely. Which is a pity. For "we" are the shareholders who may lose our investment, "we" are the users of electricity who may end up paying more for our power and "we" are the taxpayers who would have to finance any subsidies that are required.

Start with British Energy itself. As recently as three weeks before its doomsday statement, the company was still insisting that it remained financially sound enough to meet all commitments. Stockbrokers were urging investors to buy the shares, on the strength of these reassurances, as late as last Wednesday. Why the change of mind? Partly because there is no middle ground between stating that a company is financially solvent and saying that it may be unable to pay its bills.

But we can speculate about the directors' motives. While they may have received bad news at the last minute, the announcement of impending insolvency is itself blatantly a manoeuvre designed to continue pressurising other players. It notes that government ministers have agreed to hold talks on providing financial support and enabling a longer-term restructuring to take place, and (here comes the threat) "if these discussions are not successful, the company may be unable to meet its financial obligations as they fall due". The unspoken conclusion is that "we", the taxpayers, would be left with a bankrupt nuclear power industry on our hands.

As well as the Government, one of the parties which British Energy is trying to pressurise is British Nuclear Fuels. This nationalised company charges British Energy £300m a year for reprocessing its spent fuel and it has been under considerable pressure to cut a more accommodating deal. British Energy says that it could save up to £250m a year by storing its spent fuel rather than reprocessing it. I confess I admire British Nuclear Fuels' nerve. For on Wednesday it rejected British Energy's proposals, doubtless knowing that the insolvency warning would be the result.

But a second party is in the line of fire – Callum McCarthy, the chief executive of Ofgem, the regulator of gas and electricity prices. He is a target because he has used his powers in such a way that wholesale electricity prices have fallen by 40 per cent since the late 1990s. I shall need a lot of persuading not to say "bravo!" Being a regulator is a difficult and unrewarding job. When a regulator succeeds in getting prices down or at least limiting rises, he gets no applause from consumers who tend to think that the giant monopoly has done it out of the goodness of its heart. On the other hand, he or she is constantly plotted against by the industry, which makes every effort to undermine the regulator's position.

Sometimes government takes industry's side rather than the consumer's. In the case of electricity, Brian Wilson, the Minister of State for Energy and Construction, seems to be at odds with Mr McCarthy. He recently told the BBC that "we need to address the unfortunate reality that British Energy cannot get a price for its product that is reasonable. If you have a market that drives the price below the cost of generation, the company's responses are clearly limited".

And what did Mr McCarthy say to that? "This is a commercial market and, as in all markets, companies will fail – it's as simple as that." Bravo! again.

British Energy has taken a desperate course with its insolvency threat and I fear for the outcome. Naturally "we" have no direct influence on the negotiations. The bankers with whom British Energy is dealing see shareholders' funds as a surplus to be raided for the repayment of their loans – as they are legally entitled so to do. The regulator represents consumer interests but governments can bully regulators. Of course there is a presumption in favour of saving taxpayer's money, but though the words are pious, they are rarely observed.

Unfortunately, too, just at a crucial moment, the directors have put themselves into an awkward if not impossible situation. For if it can be shown that the board, or the chairman, either knowingly or carelessly, made misleadingly optimistic statements last month, then they are going to find themselves subject to legal actions by angry shareholders. This would have the effect of paralysing their ability to take difficult decisions. Yet a change of leadership might make matters worse, even if it could be brought about so late in the day.

Nonetheless, "we" should keep an eye on how all this turns out. Will misery be equally shared? Employees are at risk in terms of their jobs and their pensions. The directors should be in the same position. But rarely do they pay the price for they negotiate compensation for loss of office. It must be different this time. "We" shall see.

aws@globalnet.co.uk