Regulation cannot continue without reform

In clearing all three offers for regional electricity companies, Ian Lang, Secretary of State for Trade and Industry, has in effect declared open season for bids in the electricity sector. Despite blanket condemnation from his rent-a-quote shadow, Brian Wilson, it is hard to see how he could have done otherwise. Two of the bids raised no competition issues at all and the other, the Scottish Power bid for Manweb, only minor ones. The decision is another slap in the face for Professor Stephen Littlechild - but his case for having the Scottish Power bid referred was always a questionable one. Though the takeover clearly involves the loss of an independent comparitor, it can hardly be argued that this is critical to the regulator's ability to do an adequate job.

To the extent that there was ever any kind of a case for referring these offers it was largely an emotional one, argued from the heart rather than the head. If these bids are to be allowed, the argument went, there should be customer benefit as a quid pro quo. It is debatable that the MMC or the Government actually have the powers to impose such conditions, but even if they did, to exercise them would have seemed arbitrary and extreme. We have already had one rethink of the charging review; if the regulator still has it wrong, then it is the system of regulation that is at fault. This is not something that can be properly addressed by a Monopolies and Mergers Commission inquiry into a series of takeover bids. As Ian Lang pointed out in his statement yesterday, having privatised these companies, it is hard to argue that they should in some way be above the normal disciplines and opportunities of the market place, including involvement in mergers and aquisitions. These are now joint stock companies, not customer co-operatives, and their owners, the shareholders, are entitled to sell to the highest bidder.

The issues of charges and customer service are different ones. Public dissatisfaction with the water and electricity utilities and our system for regulating them has reached a pitch that makes radical overhaul virtually inevitable. Again, an MMC inquiry into, say, Hanson's bid for Eastern, is not the appropriate place for such a debate. Though it is plain that regulators have got the balance of shareholder and customer interest badly wrong, it is not at all clear why and what the remedy should be. This is far too serious and complex a policy issue to be decided privately by an inquisitorial competition authority like the MMC. It needs to be publicly debated and the law reformed accordingly.

So what is the answer? Certainly it would be a shame if all aspects of the present system of independent regulators were abandoned. Labour's plans to put utility regulation back in the hands of ministers would be a profoundly regressive step. Politicians answerable first and foremost to the ballot box are likely to make poor and capricious regulators and it seems hard to believe the customer would in practice end up with a better deal. Equally, the present system - blinkered, rule bound, secretive and often oppressive and ill judged in its actions - cannot be allowed to continue without reform.

Regulators need to be become far more open and sensitive in their approach, more clever and fleet of foot. As far as economic regulation is concerned, the American system of making changes subject to public inquiry, though a slow process, seems to have much to commend it since it helps establish consensus. The outcome is at least seen to be fair and there is less chance of Littlechild type cock-ups.

Presumably the three bidders have factored changes of this nature into their calculations. If they have not, then they are being foolish indeed for the era of the great electricity water industry rip offs is now largely over. Though there is still plenty of scope for gearing these companies up - put bluntly, making the companies pay for themselves - the best of the spoils have gone already.

PROMOTED VIDEO
News
i100
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Arts and Entertainment
tv
News
media
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Travel
The shipping news: a typical Snoozebox construction
travelSpending the night in a shipping container doesn't sound appealing, but mobile crash pads are popping up at the summer's biggest events
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz