Public Services Management: Challenging the champions - Consumer groups fear that the utilities watchdogs can't look both ways. Mike George reports on their fight for true independence

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The Independent Online
OVER the next few months, Ian Byatt, director-general of water services, will be deciding the future trajectory of our water bills, which have risen an average 60 per cent since privatis ation. And over the next few years, arrangements will be made to open up the gas and electricity companies to competition, which in theory could enable households to buy supplies from anywhere in the country.

The once-boring public utilities have become headline material - and not only for their profits or the salaries of their directors. Now, after Mr Byatt's decision not to renew the appointment of Diane Scott to the chair of the Yorkshire consumer services commitee, questions are being raised about who really represents consumer interests in the privatised utilities.

It has been assumed by many outside the industries that this was the job of the regulators, the directors-general of water, gas, electricity and telecoms, and their organisations, Ofwat, Offer and Oftel. But while each of these watchdogs has a general duty towards customers, they must also ensure financial viability among supplier companies, and arrange to meet other requirements such as water quality or energy efficiency.

The Government appeared to recognise this shortcoming, but put in place a bewildering variety of consumer bodies in the four industries, each different to the other. The first priv atisation, of British Telecom, required the Secretary of State for Trade and Industry to appoint four advisory bodies (England, Wales, Scotland and Northern Ireland) to communicate with the director-general. The DG himself then appointed an advisory commitee for small business, and another for elderly and disabled customers. Oftel provides the secretariat for these committees, and has organised a Telecommunications Forum for large users.

Then there are the 160 or so local advisory committees: according to an Oftel spokesman they simply 'grew out of' the Post Office users' committees and are largely self-appointed and self-perpetuating.

Vivienne Peters, who heads the independent Telecom Users Association, says the local committees are appointed rather like local JPs - 'you can't regard them as representative of general consumers'.

She has similar complaints about the regional committees: 'A better cross-section would help to make sure that BT really knows who its customers are and what they want.'

Her organisation and other consumer bodies have also been disappointed in the outcome of the Competition and Service (Utilities) Act of 1993. 'Although it was supposed to give more protection - like making sure there are clear complaints procedures - so far we have seen little happening,' she said.

Oftel's record has achieved more favourable comment than those of some other regulators, although the National Consumer Council is not alone in warning that competition has led to much bigger price reductions for business users than for residential customers.

When British Gas was privatised, the legislation set up a single body, the Gas Consumers Council (GCC). According to Cosmo Graham of the University of Hull Law School, the Government assumed gas was more likely to remain a monopoly than the telecoms industry (although all but 3 per cent of calls still use BT's network).

While the GCC chairman is appointed by the Secretary of State, the organisation is intended to be independent of both Ofgas and British Gas. For example, it was involved in the campaign against the imposition of VAT on fuel, unlike the consumer watchdogs for the electricity industry, according to Ian Powe, GCC director.

The GCC has a heavy workload of customer complaints and queries - 91,500 last year. Unlike other utilities bodies, it is widely advertised as the first port of call for customers. Even so, only about one in 10 customers is said to know of its existence. Nevertheless, its direct involvement in handling complaints gives it a level of authority not matched elsewhere. But it is also expected to comment on complex financial and business matters, like the partial break-up of British Gas and the introduction of new suppliers.

James Cooper, GCC chairman, criticised that decision and also the Government's decision to cut the GCC's grant this year - 'which represent's a pounds 200,000 windfall gain for British Gas, whose licence fee is used to finance the GCC'.

Electricity has a quite different set of consumer arrangements. The director-general of Offer, in consultation with the Secretary of State, appoints 14 consumers' committees, one each for the regional supply companies, which are serviced and financed by Offer. The chairs of the committees, with the DG, have a separate National Consumer Consultive Committee, and in recent months the chairmen have formed their own group, quite separate from Offer.

Peter Weston, spokesman for the chair group, said they needed to demonstrate their independence from Offer, 'and to have a broader policy voice on behalf of the consumer - which is difficult when the director-general is constrained by legislation to restrict the subjects he can discuss'.

Ian Powe still questions the independence of the electricity committees. In the GCC's latest campaign - to get the companies to make good use of the windfall profit from interest on the advance payments to avoid VAT - few of the committees have felt able to offer support. 'This shows a nervousness on their part to be seen to be acting against something which the regulator has pronounced on.'

Customer Service Committees for the water industry also lack independence from the regulator, according to critics. Once again, they are appointed by the DG, in consultation with the Secretary of State, and are funded by Ofwat. And the committee chairmen again form a statutory body, the Ofwat National Consumer Council - which is co-chaired by the DG.

For various reasons - such as the rapid rise in water prices, a trebling of water meters, and questions about water quality - the actions of Ofwat and the industry have been in the public eye rather more than the other public utilities. According to Bill Newman of Barnsley council, who served on the Yorkshire committee, it was that body's success in representing consumer interests that led to the decision not to re-appoint Ms Scott. He said: 'Ian Byatt's agenda does not necessarily protect the interests of the consumer. And he tried to stop us taking a view on a number of consumer concerns. In my view the whole system has proved itself to be corrupt, in a democratic sense.'

Similarly, in Liverpool, Councillor Marie McGiveron said there was a fundamental conflict of interest between Ofwat's responsibility for protecting the competitive interests of water companies and its responsibilities towards consumers. 'It appears to us that Ofwat is working to its own agenda. The city council believes that a new independent body is required - one that truly represents the interests of water consumers.'

Robin Simpson, assistant director of the National Consumer Council, concurred. 'Recent events have vindicated our view that there should be a tripartite arrangement with the industry, the regulator, and an independent and representative consumer body for each utility,' he said.

It is arguable whether anything like a conventional competitive marketplace can ever exist in the utilities, where ordinary customers can vote with their ballots or wallets. Yet that assumption seems to underpin Government policy and is presumably a reason why the roles of regulators and customer committees have been entangled - as a kind of makeshift arrangement until true competition arrives. But experiences in the US suggests that regulatory regimes do not easily wither away, and there are certainly no signs of it happening here.

(Photograph omitted)