Consumer body savages watchdogs

Click to follow

Industrial Correspondent

The Consumers Association has called for a radical overhaul of "confused" utility regulation, including changes in legislation to give customers more rights. The association's hardest-hitting attack to date on regulation emerges in a submission to the Hansard Society and is a forerunner to the association's own review of the former nationalised utilties, due for publication later this year.

The report by the association argues that consumer protection should be the principal goal of regulation but that under the present statutory framework "this is clearly not the case".

It criticises the extent to which it is left to the discretion of individual watchdogs to weigh the importance of consumers against promotion of competition and the ability of companies to finance core functions. The association demands changes to limit the freedom of regulators to depart from the objective of protecting consumer interests.

According to the report: "The present legislative framework is characterised by a confusion between ends and means. While the development of greater competition within the utility industries is clearly very important, it should not be viewed as a goal in itself but as a mechanism for ensuring that firms face incentives to improve their efficiency and, through inter- firm rivalry, to pass such cost savings on to their customers."

The association also attacks the regulators for lack of openness in their decision-making. It singles out Ofwat, the water industry regulator, for "not seeming to accept the legitimate need for independent scrutiny of its decisions on behalf of consumers".

At the same time the association notes that Don Cruickshank, the telecommunications watchdog, shows the strongest commitment to seeking out the views of the public.

The association sharply criticises non-disclosure of information about utiltity companies on the grounds of commercial confidentiality. "We are extremely concerned that excessive use of confidentiality claims is allowing operators to conceal practices that are against the interests of consumer and the public in general."

A spokeswoman for Ian Byatt, director general of Ofwat, rebuffed the association's views, saying that Ofwat made "huge amounts" of information available and encouraged public debate. She added that it was only "right and proper" that commercial confidentiality be observed where it had been requested by the company.

The association launches its broadside against a background of public dissatisfaction over boardroom greed in the privatised companies and a view that the consumer is losing out while shareholders are gaining handsomely. There has also been growing criticism that regulation is based too much on individual personalities.

The Labour Party, while appearing unclear as to what it would do about the watchdogs, has made it plain the present framework would be unlikely to continue if it comes to power.

The association wants ,as a minimum in any future regime, that price regulation should be overhauled to force companies to reduce charges most in the provision of services where people have least choice.

This would mean a separate price cap for residential customers and a means of ensuring that, through any cap, households pay only for those services they use and not to bolster investments that primarily help businesses.

The association alleges that BT's average residential customers have seen prices fall by 1 per cent between 1990/91 and 1994/95 while business enjoyed a 20 per cent reduction. It warns: "Unless targeted price control is put in place, the experience of residential telecom users is likely to be repeated in gas and electricity."