Generators light up as they are spared the MMC

SHARES in PowerGen and National Power bounced last week as Stephen Littlechild, the electricity industry regulator, announced that the two generators would not be referred to the Monopolies and Mergers Commission.

Ever since February 1992, when Professor Littlechild was asked by the House of Commons' Energy Committee to reduce their dominance in the market, the generators have traded under a cloud. In July 1993, he decided to investigate whether they should be referred to the MMC - the spectre raised by the committee. Last Friday, several self-imposed deadlines later, he confirmed that he would spare them the MMC's long-winded scrutiny for the next few years.

In return, the generators have promised that prices in the electricity pool - through which the regional electricity companies and large energy users buy their power supplies - will be reduced over the next two years. They have also undertaken to sell 6,000 megawatts of plant. But the impact on their bottom line will be relatively small.

They have been spared the need for a fire sale to dispose of their surplus capacity - something that would clearly have reduced shareholder value. They have also seen off any serious threat to their profits. Andrew Wheeler, industry analyst at NatWest Markets, predicts that with a reduction amounting to about 0.1p per kilowatt hour, the new pool price cap will cut pre-tax profits by some pounds 30m at PowerGen and by pounds 35m at National Power.

What worried the generators rather more was the introduction of a managed market and the de facto extension of the regulator's powers. Although Prof Littlechild's remit covers their licences, it has not, historically at least, gone as far as responsibility for price controls.

'We were so concerned about this that we seriously considered going to the MMC,' said John Baker, chief executive of National Power. However, the company is now convinced that Prof Littlechild is not building up his own empire.

'We also felt that it was better to retain managerial control of the issues ourselves,' said Mr Baker. Prof Littlechild appears to have been working on the same premise.

He may, too, have heeded the example of the gas business, where the Department of Trade and Industry ultimately disregarded the recommendations of the MMC. But, if the compromise he has reached with the generators is a relief to the market, it must be still more so to the Government, which is now free to sell its 40 per cent stake in both companies later in the year.

Given this agenda, many industry commentators suspected the Government would put pressure on Prof Littlechild to prevent an MMC referral. But the opposite seems to have been true. 'I think the Government was very scared of being seen to lean on Professor Littlechild,' said Mr Baker.

Start your day with The Independent, sign up for daily news emails
News
news
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
tvChristmas special reviewed
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
PROMOTED VIDEO
News
i100
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
fashion
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
tv
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Sport
sport
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all