Scottish Hydro-Electricis a special case
Friday 16 June 1995
Sympathy for electricity companies is about as fashionable as clogs, but yesterday they seemed to find support from a curious source - the Monopolies and Mergers Commission. The MMC found that Scottish Hydro-Electric had been treated too harshly by Professor Stephen Littlechild, the electricity regulator, in his price review last year. Its report on Hydro, the result of the company's protests about last year's electricity price review, actually reduced the gains for consumers proposed by the regulator, admittedly by rather marginal amounts.
What, if anything, should the MMC's report tell us about what the professor will do to the distribution industry in his rethink of price controls, due to be published next month?
The MMC has no direct control over the regulator, but its position as the appeal body against his decisions gives it clout and could have an important indirect influence over what he does. Professor Littlechild will have at the back of his mind that if he pushes the companies too far, they could follow Hydro's example and go en masse to the MMC.
The MMC in fact accepted Hydro's main arguments in favour of changing the way cross-subsidies between different parts of its business are treated. Hydro is in many respects a special case with little relevance to the rest of the industry; unlike the regional electricity companies, it is a vertically integrated generating and distribution company with customers far and wide.
Even so, there seem to be some wider lessons. The MMC took issue with the regulator's decision to reduce the level of capital on which returns in the distribution business are based. This is mildly positive for Hydro, and perhaps also for the regional companies, if only because it shows that the regulator can be challenged successfully on important financial details.
The most important lesson, however, is that the MMC has also reduced the base level on which operating costs are calculated at Hydro. If this approach was transferred to the regional companies, it would be highly costly for them. It is perhaps dangerous to take parallels with the rest of the distribution industry too far. Even though Hydro seems to have come out on top, there is little in the report that would give comfort to the RECs, which can only expect to be dealt with extremely harshly.
- 1 Morgan Freeman on the riot-focused coverage of the Baltimore protests: 'F**k the media'
- 2 The man who filmed the Freddie Gray video has been arrested at gunpoint
- 4 Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
- 5 Length of pregnancy can vary by up to five weeks, scientists discover
Boston Marathon runner's search for mystery man she kissed ends with letter from his wife
Saudi Arabia's King Salman sacks senior aide for 'slapping' a journalist behind him live on TV
Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
Italian police 'reveal' what Jesus looked like as a young boy
Florida couple forced to register as sex offenders for having sex on public beach
In defence of liberal democracy
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
Andy McSmith's Sketch: Feisty audience is the real star of an enlightening show
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...