The move comes amidst mounting public criticism of the utility industries. It also coincides with a fresh row over the millions of pounds that could be made by electricity industry executives from the flotation of the National Grid Company, which is at present owned by the 12 regional electricity firms in England and Wales. The Labour Party has called for the flotation to be delayed pending an independent investigation into the directors' "windfall".
The main work of the commission will be to examine the way in which the utilities are regulated and how the system can best be changed. Frank Vibert, director of the European Policy Forum, said: "It is now clear that many of the problems affecting privatised utilities are problems of regulation. The moment is opportune for a thorough re-examination of the way in which the regulatory system can be improved in the light of experience."
There is a growing view that shareholders in the privatised utilities have benefited at the expense of customers and that tougher regulation is needed. Critics of the regulators also say that too much power is vested in individuals and that they are not sufficiently accountable.
Earlier this year, the Public Accounts Committee launched its own wide- ranging review of regulation in the gas, electricity, water and telecommunications industries. The PAC said the investigation will examine the role of regulators and any recent price reviews they have carried out.
Robert Sheldon, chairman of the PAC, said: "The job of regulators involves problems which are common to all... We seemed to slip very easily into this system of regulation in the UK without sufficient forethought and we are now learning from our mistakes. The Government does not like to intervene, so there is really nobody to exercise any oversight."