Profits from Grid may be capped

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Industrial Correspondent

Professor Stephen Littlechild, the electricity industry watchdog, warned that the National Grid Company could face a cap on profits in future, or a sharing of dividends between customers and shareholders.

The suggestion comes weeks before the planned pounds 3.5bn flotation of the Grid, owned by the 12 regional electricity companies in England and Wales.

In a consultative document issued yesterday on the future control of the NGC, Professor Littlechild asked for views on whether the price control system used at present should be scrapped.

The Grid currently keeps transmission charges to inflation minus three percentage points, but the formula expires in early 1997.

Professor Littlechild said the new control could "relate to profits or to some form of sliding scale involving prices, profits and perhaps dividends".

He also asked for views on "the basis for NGC's shareholders to receive an appropriate return, and the means of assessing this".

One City analyst said: "This shows that regulatory risk remains a big negative. It would not be good news if profit-capping was to be implemented." Even if the present system of price-capping continued, the future formula was likely to be tougher and could involve a one-off cut of up to 15 per cent.

A spokesman for the Grid said: "This is only the first communication in a discussion and we will respond in due course."