Outlook: PowerGen

PETER MANDELSON is reported to be in favour of transferring responsibility for merger decisions away from ministers and into the hands of an independent competition authority. Yet the latest decision from the Secretary of State for Trade and Industry suggests he is less keen on practising what he preaches.

Both the Director General of Fair Trading, John Bridgeman, and the electricity regulator, Professor Stephen Littlechild, had reservations about allowing the PowerGen-East Midlands merger through.

The OFT recommended that the deal be packed off to the Monopolies and Mergers Commission. Professor Littlechild felt that, while undertakings would be sufficient to overcome the competition worries, the minimum requirement was the disposal of 6,000 megawatts of generating capacity.

Mr Mandelson has waved the deal through and allowed PowerGen to get away with selling only 4,000 megawatts - the equivalent of two power stations. This is one more than its chairman Ed Wallis had in mind but one less than Professor Littlechild deemed necessary to create a competitive market.

If Mr Mandelson is going to ignore one set of advice and split the difference in respect of another, it is worth asking what the regulators are there for.

Mr Mandelson was already on shaky ground since it is known he was lobbied by PowerGen over the East Midlands deal before he took up his new post. Nor is his position helped by the fact that the lobbying was done by GPC, the company that employed the Mandelson acolyte Derek Draper until Lobbygate forced him to earn a living elsewhere.

There may be persuasive arguments as to why it is now right to restructure the electricity industry into a series of large integrated players which generate, distribute and supply power. Certainly, they have more of a chance of making domestic competition work than if the existing regional suppliers are allowed to sign a non-aggression pact and sit back on their local franchises.

But Mr Mandelson needs not only to be whiter than white, but also to be seen as such. There are other awkward competition decisions looming for him - such as the sale of British Airways slots and the Murdoch bid for Man United. The sooner he relieves himself of responsibility for such matters, the better.

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