Watchdog hands out blame for electric prices

Professor Stephen Littlechild, the electricity regulator, yesterday blamed the difficulty of controlling electricity prices and profits on the Government's golden shares in the companies, which prevented takeovers in the immediate aftermath of privatisation, writes Peter Rodgers.

He said regulation would have been easier if there had been no protection, so "the Government would have had to think more carefully about whether bids would happen, and what a bidder would do". This would have clarified how price controls and capital structures should be set. Professor Littlechild suggested this was a lesson that could be learned in any future privatisations.

The Trafalgar House offer late last year for Northern Electric, which defended itself by offering large amounts of cash to shareholders, emphasised the riches contained in the electricity companies.

It also prompted Professor Littlechild to reopen last year's price review, which began to look far too generous to the industry.

Professor Littlechild was speaking at a conference on regulation organised by Labour's Industry Forum, also attended by Ian Byatt, the water regulator, and Clare Spottiswoode, the gas regulator.

All three argued for a continuation of the present system of regulation based on a formula linked to the retail price index, although Mrs Spottiswoode said that it might be possible to link this to some form of profit-sharing in a hybrid system.

However, Dr Jack Cunningham, the shadow trade and industry spokesman, said that Labour would stick to its plan to introduce profit-sharing in which consumers would benefit automatically once profits in the industry exceeded a certain level.