The Government had advance warning that Offer, the regulator, would make a statement on electricity prices after dealings in the shares began. The statement sent shares in the sector plunging and enraged investors who had just bought stakes in the generators.
The Stock Exchange said last night it is still considering the circumstances surrounding the £4bn sale of shares in both National Power and PowerGen. A spokeswoman said that the Exchange has completed its enquiries and "is now discussing with the appropriate regulatory bodies how the matter can best be taken forward".
John Baker, the National Power chairman, said: "The price might have been different - that is lower - if the market had known what would happen. The company is considering whether it has recourse to the Government over the price of the share repurchase."
"We have put the Treasury on notice that we are considering our position. It is a matter we will need to bottom out in the light of advice we receive," he added. Mr Baker insisted that the company is not going "gung-ho" for the Government but that the board is acting according to its responsibilities.
Mr Baker said that he was "totally pole-axed" when he heard about the announcement by Professor Stephen Littlechild, director general of Offer, that he would again review electricity distribution prices in England and Wales only months after five-year price caps had been agreed. The about-turn undermined investor confidence in the regulated utilities and enraged those who had just bought shares.
The Government was aware there would be a statement on prices the Friday before dealings began but went ahead with the sale. "If I had been aware I would have put that information into the public domain unequivocally. I think we should have been told," Mr Baker said.
His attack came as National Power announced a 16 per cent jump in pre- tax profits to £735m in the year to 31 March. Earnings per share rose by 17 per cent to 43.6p and the dividend is increased by 24 per cent to 15.45p. The results were ahead of City expectations and were described by one analyst as "hugely good".
The shares rose by 2p to 467p compared with the price of 460p paid in the share buyback. The Treasury said that having taken legal advice, it believes there is no basis for revising the amount paid for the shares in the March sale.
National Power's results herald a season of hefty profits from the sector. The 12 regional companies are expected to announce pre-tax profits totalling about £2.2bn for the year, up from £1.8bn in 1993/94.
Mr Baker said: "The results reflect our efforts now sustained over four years to improve the efficiency of our operations to drive out costs and to find better ways of doing things."
National Power shed 1,000 jobs over the 12 months, bringing the workforce to 5,000 and said that numbers in the core electricity business will continue to "drift down". The company is expecting to create jobs as it continues its expansion drive overseas. Market share fell to 34 per cent during the year compared with 46 per cent five years ago.
Mr Baker warned that regulatory uncertainty continues to overhang the business. The company has been told by Offer to sell 4,000 megawatts of generating capacity - equivalent to two large power stations - or face being referred to the Monopolies and Mergers Commission. National Power is in talks with several groups about selling power plants but is also considering a demerger of stations into a separate company within the group.