Northern scraps London link-up

Northern Electric, the regional power company taken over by the US group CalEnergy last year, has abandoned plans hatched by the old management to merge its electricity and gas supply operations with London Electricity.

The plan, announced by the former Northern chairman David Morris in December, was a key plank of Northern Electric's defence against CalEnergy's hostile pounds 782m bid.

Although Northern never admitted London was its partner, the aim was to slash costs by combining the customer service operations of the two companies in preparation for domestic power and gas competition in 1998.

The plan was seen as having some commercial logic, because London has a multi-million pound, 24-hour customer service centre in Sunderland, employing 600 staff working on billing support and telephone enquiries. Northern's two customer centres are based in Newcastle and a new site near Thornaby on Teeside.

London, now taken over by another US utility, Entergy, chose the Wearside location because of its comparatively cheap labour and building costs.

The decision to scrap the joint venture with London is one of the first to be taken by David Sokol, CalEnergy's chairman, since he took control of Northern. Mr Sokol has replaced most of Northern's management, putting CalEnergy executive Greg Abel in charge of reappraising the Tyneside company's long-term strategy. Insiders were stunned that Mr Morris was given a seat on CalEnergy's board, though he no longer has a role at Northern.