BT calls for watchdogs to watch watchdogs

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UTILITIES regulators should appoint non-executive directors to their boards to check on them, according to Iain Vallance, the chairman of BT.

Mr Vallance said last week that Britain's regulatory system is flawed because no one regulates the regulators. The watchdogs were put in place when telephone, gas, water and electricity industries were privatised. Their function is to protect consumers and promote competition.

Mr Vallance also attacked Oftel, the telecommunications regulator, for secret deliberations, saying this has made it almost impossible for BT to seek a judicial review of regulatory decisions.

He pointed out that the company's only option when it does not agree with Oftel is to go to the Monopolies and Mergers Commission. MMC investigations could take months and were a drain on management resources.

BT suggests that two non-executive directors should be appointed to each regulator's board. It is worried that many decisions come from one man - currently Bill Wigglesworth in the case of Oftel. Mr Wigglesworth is acting director-general and replaced Sir Bryan Carsberg, who became Director-General of the Office of Fair Trading.

Mr Vallance also thinks each watchdog should have a limited life, laid down in law. His comments come amid growing concern among the utilities that the regulators interfere too much in their business. BT recently averted an MMC reference only by accepting a tough new regime that limits price increases to inflation minus 7.5 percentage points. BT has also been told to separate its accounting for local and long-distance businesses to allow other companies to use its network on the same terms. BT maintains this split will be hard to implement and has yet to agree the details with Oftel.

Robert Evans, chairman of British Gas, has also complained about the regulatory burden on his group.

British Gas was referred to the MMC after it failed to agree with its watchdog, Ofgas, over how other suppliers, including oil companies, could use its pipes.

Water companies have been warned against any diversification that could be bad for their basic businesses. They have also been told that dividends should not be excessive.