Bill targets regulators' powers

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The controversial power of utility regulators to overrule the Monopolies & Mergers Commission could be curtailed in the Government's planned competition bill, a move which could have widespread implications in the row over price controls for British Gas's pipeline network and other privatised groups.

The bill, likely to be published in the autumn, could be expanded to include provisions preventing regulators from rejecting recommendations made by the MMC. The Department of Trade and Industry is understood to be concerned with the recent decision by the electricity watchdog for Northern Ireland to reject a price regime recommended by the MMC. It was the first time a utility regulator has threatened formally to override the MMC's advice.

Douglas McIldoon, the regulator, was unhappy with the MMC's conclusions on depreciation policy for Northern Ireland Electricity (NIE). Mr McIldoon wanted to cut NIE's revenues by 33 per cent from this year, but the MMC concluded the cut should be 28 per cent. NIE has threatened to take the regulator to the High Court if he refuses to implement the MMC's more lenient recommendations.

The DTI is keen to move swiftly on the issue because of the potential for further regulatory rows. It would mean including provisions in the bill overriding the existing acts of parliament which privatised the electricity, water and gas industries. Clare Spottiswoode, the gas regulator, has already hinted she may follow Mr McIldoon's lead if the MMC proposes a lenient price regime for British Gas's pipeline business.

Competition lawyers welcomed the development yesterday which they said would clarify the vexed relationship between regulators and the MMC.

The planned competition billis intended to toughen the law on cartels and abuses of market power, shifting the UK's regime towards the prohibitive system used on the Continent.