Utilities call for higher bills

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The Independent Online
Several privatised utility companies are pressing for "immediate" increases in customers' bills to compensate for surprise tax changes announced in last month's Budget.

Ian Russell, finance director of ScottishPower, said yesterday he would write to the electricity and water regulators to press for higher bills when the tax changes take effect from next April. The increases for customers would be relatively small, though they would be "in pounds rather than pennies".

The move is likely to embarrass the Government as ministers and utility executives gather today for a DTI conference hailing the achievements of privatisation.

The tax changes slash the amount of new investment companies can write off against corporation tax bills from 25 to 6 per cent. The alteration only applies to spending on assets with lives of more than 25 years, and has many exclusions including investment on trains and ships.

Tax experts have predicted that utility companies, which invest heavily in pipes and cables, will bear the brunt of the measure. It will raise pounds 45m for the Treasury next year, rising to pounds 675m a year in 1999/2000.

Mr Russell estimated the tax change would ultimately knock pounds 25m off ScottishPower's annual profits. He said: "We are looking and I'm sure every other utility will be looking very hard at recovering the extra tax charge."

British Gas also confirmed it would be pressing for softer price cuts for its pipeline business, TransCo, which is the subject of a Monopolies and Mergers Commission inquiry, to compensate. The tax change will cost the company an extra pounds 40m a year by 1999/2000.