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Outlook: ScottishPower

THE REGULATORY risks inherent in ScottishPower's multi-utility strategy are coming home to roost. Whereas other electricity companies have had to contend with one or, at worst, two price reviews, the not- so-canny Scots are facing a quadruple whammy from the energy and water regulators.

The truism that water and electricity do not mix has been borne out by the share prices of the multi-utilities over the past 12 months. While ScottishPower may not be in as bad a shape as, say, Hyder, things are clearly not that good either.

It does not take much reading between the lines of yesterday's interim results statement to see that it is stuck between a rock and a hard place - either a dividend cut or an appeal to the Competition Commission with no guarantee of success.

ScottishPower is juggling with three electricity and one water price reviews which in itself represents a huge drain on management time. Of the four, the one it seems most bruised about is Ian Byatt's proposal that Southern Water slash its prices by pounds 70m next year, most of which will be reflected in lower profits.

The two Ians who run ScottishPower, Robinson and Russell, still think the other Ian will change his mind but the chances of that are slim.

Perversely, the response of ScottishPower shares yesterday was to rise strongly. That, however, had more to do with the market's perception that the Scots' pounds 4bn takeover of the US utility, PacifiCorp, is finally about to happen a year after the deal was first unveiled.

ScottishPower has been warming up the analysts by pointing to the price increases and cost savings it can look forward to in PacifiCorp's West Coast markets once the deal goes through.

But if ScottishPower's experience here teaches us anything, it is that the regulatory vice is only ever turned in one direction. The Scots think they can show the Yanks a thing or two about how to run utilities.

But the US regulators are also taking a lesson or two from their UK counterparts by moving away from profit capping and towards incentive regulation. ScottishPower's regulatory risk can only multiple even further.