RECs will not meet competition deadline

Utilities: United criticises Offer for underestimating scale of electricity roll-out as two water companies announce rise in profits

Most electricity companies would not meet the April 1998 target date to start the roll-out domestic competition, Professor Stephen Littlechild, the industry regulator, admitted for the first time yesterday.

The progress report by the electricity watchdog, Offer, concluded that just three of the 12 regional electricity companies (RECs) would meet the deadline, confirming what had become an open secret in the industry. They are Eastern, Seeboard and Yorkshire, along with the Electricity Pool, the wholesale power market. The remaining companies, including the two Scottish power groups, will be ready by July with the possible exception of Southern Electric which could be even further behind. Offer said there could be financial penalties for latecomers.

Professor Littlechild defended the delay, arguing it was a considerable improvement on previous industry rumours of a 12-month postponement: "The general impression was that a much longer delay was envisaged. To keep it within a few months I think it is a really significant achievement given the magnitude of the task."

But the largest REC, Eastern, claimed full competition could slip to 1999. Offer's aim is to introduce choice to 26 million households by postcode area in a phased process lasting six months. John Devaney, Eastern's executive chairman, said: "It could take two years for the whole. You will find some companies don't make this time-table. They're in difficulties but no one wants to own up to how long it will really take."

Professor Littlechild insisted he did not foresee any further delays: "That's not what we are expecting at the moment. They don't foresee this on the basis of what they say they can do."

Several RECs also renewed their criticism of Offer's project management. Brian Staples, chief executive of United Utilities, which owns Norweb, said Professor Littlechild "had never wanted to stand up and grip it". Mr Devaney said Offer had underestimated the scale of the task.

A new dispute with Offer was looming last night over how much of the development costs would be passed on to customers. Mr Staples stood by his estimate that competition would cost the industry pounds 1bn, against Offer's estimate last week that up to pounds 383m could be included in customer bills.

Mr Devaney said costs were still "a huge issue," estimating competition would cost Eastern pounds 50m. Mr Staples added: "Professor Littlechild's estimates are wildly away from reality. I don't think he looks at these things in a pristine manner."

United Utilities yesterday revealed a 14 per cent increase in annual pre-tax profits before exceptional write-offs to pounds 444m and raised its dividend by 13.9 per cent to 37.2p. Sir Desmond Pitcher, United's chairman, said he "couldn't even contemplate" a legal challenge to the windfall utility tax until he saw the detailed legislation.