Electric chiefs face showdown over grid sale

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Top executives of the 12 regional electricity companies today face a showdown over plans for the sale of the National Grid Company, which they jointly own and which is estimated to be worth £5bn.

The companies have so far failed to agree with each other on when - or if - to proceed with the sale and how much should be paid to the customer in rebates.

The companies are also at odds over whether to attempt to link the grid sale and rebate to the threatened review of electricity prices by the regulator, Professor Stephen Littlechild. The regulator heralded a price clampdown last week, plunging the industry into turmoil and wiping £3.5bn off the value of shares.

Some firms hope that a large one-off rebate for consumers, perhaps £50, will be accepted as a "quick fix" by Professor Littlechild in lieu of tough new price controls. Others view the issue of a rebate as entirely separate from that of price controls. A meeting last Friday broke up in disarray because of the divergence of opinion.

One industry source said: "There is a push in some companies to do a quick and dirty deal with Professor Littlechild. We are unhappy with it. A quick fix would be seen for what it is and he is worried about the future - he has got to be seen to get it right."

Another source said: "The whole thing is getting twisted and confused. We are still in discussion over the sale of the grid and the question of a rebate for customers. Then there is the pronouncement from Littlechild on new price controls. It is important that these things be seen as separate issues.''

Midlands Electricity is among the companies thought to be in favour of an upfront payment to customers. The argument is that this could take the form of a normal inflation-linked cap on prices, with the bulk of the benefit for customers at the start.

A one-off rebate would however disadvantage larger companies, such as Southern Electric and Eastern Electricity, because they have so many more customers to pay.

Until recently the grid was set to be sold in the summer but the renewed crisis over the price review may now throw everything off track because of the general uncertainty in the industry.

Professor Littlechild is expected to clarify his plans for a review next week but the outcome will not be known until June. Until the companies have some idea about their future financial strength, they are unlikely to be able to reach a common view on the grid sale.

There have already been months of negotiation with the Government about customer rebates and the amount of tax the Treasury would take on the sale of the grid.

At one point the view was that companies would pay a total of £1bn in tax, but the ability of some funds to claw it back would leave the Treasury with several hundred million pounds less than that.