Electricity and gas watchdogs to be merged in regulatory overhaul

The Government is to merge the gas and electricity regulators as part of a sweeping overhaul of the regulatory regime designed to improve consumer protection and "de-personalise" the way the two industries are policed.

The changes, as Michael Harrison reports, are likely to see the departures of Clare Spottiswoode from Ofgas and Professor Stephen Littlechild from Offer.

Plans to revamp the system for regulating Britain's privatised utilities will be set out in a Green Paper to be published in January.

The document will back the idea of merging Offer and Ofgas into a single regulatory authority to coincide with the liberalisation of the domestic gas and electricity markets.

But it is also likely to advocate far-reaching changes in the way the different regulatory bodies for the energy, telecoms, water and rail industries are staffed and run.

The Government has come down in favour of de-personalising the regime so that individual regulators are no longer pitted against particular companies. The present system has been criticised for vesting too much power in the hands of regulators and allowing personality conflicts to colour the way industries are regulated.

One option is to replace the individual regulators with regulatory panels. Another is to supplement them with non-executive boards of advisers.

There have even been suggestions in some quarters that this practice should be extended to the Office of Fair Trading, particularly given the extensive new powers that the Competition Bill will give John Bridgeman, the director-general of Fair Trading, to clamp down on cartels.

Ms Spottiswoode has already hinted that she may not stay on at Ofgas when her contract expires next October. Ministers do not expect Professor Littlechild to be a candidate to take on the job of running a combined regulatory authority either, although his pounds 109,000-a-year contract does not run out until August, 1999.

He is the longest serving regulator, having been in the job since 1989. If both he and Ms Spottiswoode move on it would bring to four the number of regulators that have resigned or announced their intention to quit since Labour took office last May. Don Cruickshank is leaving Oftel to return to private industry and Sir Graeme Odgers, chairman of the Monopolies and Mergers Commission, is doing likewise.

In his submission to the regulatory review Professor Littlechild backed the idea of merging Ofgas and Offer, although he said it would be an "onerous" job to run the combined regulator involving a heavy workload. Ms Spottiswoode has also been in favour of a merger for some time since it is now widely agreed that the regulation of the energy industry needs to mirror the way it is now structured.

A number of electricity companies have made inroads into the domestic gas market and last week Centrica, the trading arm of British Gas, announced plans to enter the domestic electricity market when it is thrown open to competition from next April. British Gas has promised to cut electricity bills by 15 per cent.