Labour to rein in utilities

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The Independent Online

Industrial Correspondent

The Labour Party has promised a radical overhaul of utility regulation, including control of profits and and a fairer deal for consumers.

Brian Wilson, shadow spokesman on trade and industry, also said that under a Labour government, less power would be given to individuals than under the current regime.

Speaking at a London conference, Mr Wilson said the recent decision by the electricity watchdog, Professor Stephen Littlechild, to re-open his review of electricity price caps "spelt the death knell" for the existing controls, which are based on an-inflation linked price limit.

The need to re-open the price review only months after it was agreed showed regulators were at a "massive informational disadvantage" compared with the companies which had every incentive to obscure the picture regarding costs and investment.

Mr Wilson said that Labour might introduce automatic price cuts where profits exceeded a "normal" level. Although no decisions had been taken, a profit-sharing scheme might be the consumers' best protection, while still giving companies incentive to increase efficiency.

Labour has yet to judge whether a "windfall tax" on utility profits would be appropriate in the short term, but Mr Wilson said that in the longer term, any need for a windfall tax would mean the system was not working.

Other proposals under consideration include the establishment of advisory panels to "assist" regulators in decision-making and a clear mechanism for appeals.