ScottishPower, the rival bidder for Southern Water, has already committed itself to delivering a 3 per cent cut in permitted water charges for 1998. There are no similar concessions to customers from Southern Electric.
A spokeswoman for Mr Byatt conceded yesterday that the regulator has no powers to insist on lower charges when an electricity company bids for a water concern.
However, Mr Byatt is pursuing early sharing of efficiency gains between customers and shareholders as a matter of industry-wide policy, she added. As a result, Mr Byatt would "expect" such concessions to be forthcoming from Southern Electric.
Mr Byatt's intervention could prove a problem for Southern Electric since the price it is being forced to bid for Southern Water is already viewed by the City as pricey.