Electricity firms face tougher price controls

Tighter price controls on the electricity industry are expected to be announced today.

Although the new controls - expected to be announced by Professor Stephen Littlechild, the electricity regulator - would not mean an immediate price cut for domestic users, it could pave the way for a slowdown in the rate of future price increases - or even a partial freeze.

The move follows an outcry over an offer of more than £500m in "sweeteners" to shareholders by the board of Northern Electric, in an attempt to persuade them to refuse a £1.23bn hostile takeover bid from Trafalgar House.

The Northern carrot of cash and shares unleashed feverish speculation that the other 11 regional electricity companies would be forced to react by releasing "shareholder value" in a similar way.

This is thought to have persuaded Professor Littlechild that his review of electricity distribution prices, announced last year, was too lenient.

Today's announcement is expected to leave in place the new price controls due to take effect on 1 April, but to pave the way for a look at how these might then be adjusted.

The Labour Party and consumer representatives have called for a payback to customers following the Northern offer to shareholders, saying that if this amount of money is available, customers as well as shareholders should benefit.

Labour has predicted a multi-billion pound bonanza for shareholders as bids for other regional electricity firms emerge when the Government's special share expires at the end of this month.

Professor Littlechild's move comes at a crucial time in the Trafalgar House bid for Northern. The final deadline for acceptances of the £11 per share cash alternative is on Friday. Although the bid has been cleared by Michael Heseltine, President of the Board of Trade, Professor Littlechild has been considering whether he has grounds to refer it to the Monopolies and Mergers Commission.