Ian Byatt, director-general of Ofwat, yesterday said the merger would reduce his information on the regulated water business and that the issue could be resolved through a separate quote.
A spokeswoman for Mr Byatt said a separate listing was likely to be a feature in all future mergers involving the 10 big water and sewage companies.
The issue was not raised earlier this year when North West Water acquired Norweb, the electricity firm operating in the same area. But Lyonnaise des Eaux of France recently agreed to list all its UK water interests by 2005 as part of the Government's clearance of its takeover of Northumbrian Water.
In a consultation document issued yesterday, Mr Byatt said: ``I would welcome comments, in particular, on the effect the merger could have on managerial effectiveness. We have also drawn attention to the fact that Swalec's stock market quotation would disappear and the characteristic of that of Welsh Water's quotation would be radically changed. This would lead to a loss of information about the way investors view the companies."
Ofwat said the bid raised similar concerns to those relating to the bid by North West Water for Norweb, but added: ``The world moves on and we would like to see this [separate listing] in all future takeovers in the industry." A spokesman for Welsh Water said the watchdog was consulting on the possibility rather than saying it would happen. ``We will respond in due course," he said.
A spokeswoman for the electricity regulator, Offer, said it was not asking for a separate listing for the core electricity operations in South Wales. But Professor Stephen Littlechild, director-general of Offer, is also concerned about loss of information and is likely to seek amendments to the operating licences to resolve the issue.
The consultation, being conducted jointly by Mr Byatt and Professor Littlechild, will result in a recommendation to the Office of Fair Trading, which in turn advises the Government on whether the bid should be referred to the Monopolies and Mergers Comission.
The document warned that the regulators at present have wide-ranging powers to acquire information from regulated companies about their regulated activities and that they need to secure continued access to sufficient high-quality information to allow them to carry out their duties.
Professor Littlechild has already produced licence modifications to achieve improved access to information. These will be formally published after further discussion with the companies concerned.