A waste of everyone's time, money and energy

The more Ian Lang's decision to block National Power and PowerGen from bidding for regional electricity distribution companies is examined, the more bizarre it appears. Mergers policy and, more particularly, the future of the power industry seem to have been left in a mire of uncertainty; if the Trade Secretary's intention was to calm things down, to put the lid on the frenzy of takeover activity in the sector, what he has achieved is the reverse. His decision may have created more problems than it solves.

Taking it from the top, the first effect is to expose the two distribution companies that National Power and PowerGen were bidding for to the strong possibility of takeover by overseas companies. Since Mr Lang has already allowed foreign takeovers for other distribution companies, he could hardly justify blocking them in this case. Midlands is said to have received a couple of alternative approaches already.

The second effect might be to halt the sale by PowerGen of generating plant to Eastern Electricity, now part of Hanson, since this deal was conditional on PowerGen succeeding in its bid for Midlands. If in turn PowerGen fails to go through with the sale, there is likely to be a fresh Monopolies and Mergers Commission inquiry into its failure to comply with the regulator's demands. That would almost certainly broaden out into an examination of the generating market more generally, undermining the Government's proposed flotation of British Energy, the nuclear power company, on the stock market.

The third effect is to throw Eastern's expansion into generation through the acquisition of plant from National Power and PowerGen into doubt. If vertical integration is not allowed for National Power and PowerGen, why for Eastern?

Mr Lang's own view, which although it may not be shared by his own department is certainly also the view of Number 10 and the Treasury, is that he has acted in an entirely logical fashion, in accord with a vigorous free market approach to competition policy. He argues that if you are going to get proper competition in the electricity market after 1998, the target date, the last thing you should be doing is allowing overly powerful generating companies to gobble up the supply side of the industry now. Once competition is properly developed, well then maybe, but not now, when the generators would be able to use the distributors as a captive market for their own output.

But while there may be something in this argument, there is no doubt that by blocking out the generators he has left the electricity industry in a state of undiluted confusion. By sticking two fingers up at the Monopolies and Mergers Commission, which recommended that the bids should be allowed to proceed if certain conditions were met, he has also in effect assigned that august body to the dustbin of history. What's the point of having an MMC if its recommendations do not carry any weight? You got it wrong, Mr Lang is in effect telling Graeme Odgers, chairman of the MMC.

An overhaul of the competition authorities is long overdue and if that is the upshot of the power shenanigans, then it may be no bad thing. What to do about the electricity industry is a much more difficult question to answer, but certainly ministers need to spell out much more clearly what is acceptable and what is not. Ed Wallis, chief executive of PowerGen, would never have bid for Midlands were he not given some encouragement by ministers to believe it was acceptable. In any case, after Mr Lang's decision to allow vertical integration in the case of Scottish Power's bid for Manweb, it was entirely reasonable to think that it might be allowed in other cases too. If Mr Lang's position is that it is allowable, but only when the generator's share of the market is below a certain level, then he should say so and define what that benchmark is.

By allowing these questions to go unanswered, the Government has wasted everyone's time, money and energy.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links