Comment: North West's power pitch proves persuasive

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The Independent Online
Sir Desmond (I-speak-to-the-Prime-Minister-at-least-once-a-week) Pitcher, clearly has to be taken seriously after all. Somehow or other the chairman of North West Water has persuaded Ian Lang, President of the Board of Trade, to go against the advice of the new Director General of Fair Trading and allow North West's ill-judged pounds 1.8bn bid for Norweb to go through without a reference. For the new DG, this is quite a slap in the face. Only four weeks into the job, he has had his first high-profile piece of advice rejected.

On a number of fronts, this is a decision full of little ironies and mysteries. Until now, the Office of Fair Trading has consistently recommended that bids for electricity companies should be cleared. John Bridgeman, new to the job, is entitled to his own view and wants to be seen as his own man. In any case, this is the first cross-utility bid. Even so, it is hard to see why he should turn his back on precedent - the more so because in this case, unlike the others, Professor Stephen Littlechild, the electricity regulator, actually swung the other way and recommended clearance.

Indeed, in the search for explanations, the Littlechild factor might seem as good as any. Sensing a popular cause, the new director-general, a little wet behind the ears, must have taken the view that the thing to do was the opposite of what the electricity regulator wanted. Seriously though, in the absence of any adequate explanation of what either the OFT's or the Secretary of State's thinking on all this is, it is only possible to speculate.

Certainly what was being said by the Department of Trade and Industry yesterday failed to cast much light on the darkness. Barriers to entry, regulatory issues, and concern about "management efficiency" were cited as the reasons the OFT wanted a reference. But as to what any of these things meant, the OFT hid behind the usual confidentiality excuses.

The DTI was a little more obliging but not much. If anything, concern about "management efficiency" seems to be a veiled warning that Sir Desmond and his crew might not be able to cope with managing both a water and an electricity utility.

Given the high price Sir Desmond has been forced to pay to secure utility domination of the North-west, there may be something in this.

To make this deal work, North West has to push through deep, deep cost cuts. There is doubt that the joint facilities management operation foreseen, a company that will lie outside the regulated structure of both industries, will be up to the job.

Even so, as mergers policy goes, such concern is a curious throw-back to old-fashioned concepts of public interest. In the "anything goes" mergers environment of today, the only test is meant to be competition, and even that doesn't seem to be taken too seriously judging by some recent DTI decisions. While it is easy to understand why Mr Bridgeman should not want to be thought of as Mr Lang's poodle (or are we still talking about Michael Heseltine here?) it is odd that someone who was chosen because he was once a businessman should find himself so out of sync with government thinking.

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