Three heads better than one for regulation

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The Independent Online
Nearly everyone agrees that there is something fundamentally wrong with the way our privatised utilities are regulated. Even one or two of the regulators themselves think the system is not all it might be. The problem has been summoning up the will to do much about it.

Into this void has stepped, wait for it, The Commission on the Regulation of Privatised Utilities, a collection of the great and the good funded by Graham Mather's European Policy Forum and the Hansard Society with a little help from BT, British Gas, the National Grid and the Joseph Rowntree Trust.

Its report, published yesterday under the chairmanship of John Flemming, warden of Wadham College, Oxford and a former chief economist at the Bank of England, rounds up most of the usual suspects and places them in the stocks. Lack of accountability and transparency, rule by personality cult, and the absence of a proper appeals procedure are just a few of the familiar brickbats.

There is, however, one glaring omission - the total failure to examine whether the British model of economic regulation using the RPI-X formula has worked to the benefit of consumers or indeed the regulated industries themselves. The Commission's rather glib answer is that everyone agrees RPI-X has done a good job. Try telling that to Dick Giordano at British Gas or, indeed the Labour Party, which thinks the present price control formulas should be replaced with some form of sliding scale regulation that allows consumers to get a share on an annualised basis of excess profits.

That aside, the report's central recommendation - that we should replace Professor Stephen Littlechild at Offer, Clare Spottiswoode at Ofgas, Ian Byatt at Ofwat and Don Cruickshank at Oftel with three-strong executive boards - is not a bad one.

Coupled with the other recommendations - a streamlined appeals procedure, a statutory duty on regulators to publish the reasoning behind their decisions and a greater say for consumer councils - this approach might go some way to restoring public faith in the regulatory system and give it the legitimacy it seems to lack.

The problem will be finding someone to take up the baton. If the Conservatives are re-elected, it will hardly be in the Government's interests to admit that the present set-up hasn't been working. Neither consumers nor shareholders would thank it for that. As for Labour, imposing a windfall tax on the privatised utilities will feature several magnitudes ahead of any consideration about how they ought to be regulated. Reform of utility regulation will figure a long way down Labour's list of priorities.

The Commission's report is commendably slim but at pounds 30 a throw it looks destined to gather some expensive dust.