Electricity shares storm hits City

Insider dealing row overshadows news that bills will fall
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The Independent Online
A row over possible insider dealing in electricity shares erupted yesterday, overshadowing the announcement of a pounds 1.25bn cut in electricity bills over the next four years for 22 million customers.

The price-cut formula leaked into the stock market and forced Professor Stephen Littlechild, the electricity regulator, to bring forward his announcement from this morning.

The Stock Exchange inquiry into the way electricity shares soared yesterday morning is expected to lead to an insider dealing investigation. Professor Littlechild said: "We have evidence that numbers in this report were available to some people in the marketplace."

Gordon Brown, the shadow Chancellor, condemned what could prove to be another intense embarrassment for the Government over the privatised utilities. He said: "I want to know who knew and when. Someone has been in a position to make a lot of money."

Tim Eggar, the energy minister, deflected Labour's demands on Channel 4 News last night: "The important thing about Mr Littlechild's announcement is that it's very good news for the consumer."

Earlier Professor Littlechild confirmed that personal copies of the report had been made available yesterday morning to the chief executives of each electricity company "as a matter of courtesy", with instructions they should not be shown outside the companies. A handful of other organisations also saw the report.

He said he would now review his "courteous" policy of letting companies have reports 24 hours in advance. Professor Littlechild said he did not know where the leak came from but was confident it was not from his office. He rejected any suggestion that he should resign as a result of the leak, which he described as "very annoying".

Stock Exchange sources said they were pleased that Professor Littlechild had consulted them when share prices began to rise, and took their advice by bringing forward publication.

The price controls announced yesterday will lower electricity bills in England and Wales by pounds 1.25bn over the next four years in addition to pounds 2.75bn of price curbs announced last August. Those earlier cuts led to soaring electricity company shares and speculation that most of the companies would be taken over.

The latest change means that the average annual household bill of pounds 360 will fall by pounds 8.90 next April. As a result of the two reviews by Professor Littlechild last year and this week, households will pay pounds 110 less between April 1995 and 2000.

The cuts were attacked by the National Consumer Council as "not good enough". Philip Cullum of the Consumers' Association said: "This only confirms that last year's cuts were far too soft. This is an industry which has been blatantly overcharging customers for years."

Under Offer's proposals, the 12 regional electricity firms will cut distribution charges by between 10 per cent and 13 per cent in April 1996. Thereafter they must keep annual price increases to inflation minus three percentage points until the end of the decade. Distribution charges account for one quarter of the average household bill.

Under the previous price control, cuts of between 11 and 17 per cent were imposed in April - a reduction of pounds 12.60 on average bills. The subsequent cap was to be "RPI minus 2."

Professor Littlechild said: "These proposals represent the maximum further reductions in charges that can be reasonably secured for customers, consistent with improving quality and reliability of service, financing increased expenditure on the distribution network, adequately rewarding existing investors and maintaining the incentive for greater efficiency." The companies have until 4 August to decide whether to accept the new controls or be referred to the Monopolies and Mergers Commission.

In March, Professor Littlechild's decision to review prices again was regarded as an embarrassing U-turn which wiped pounds 3.5bn from electricity shares.

City fury, page 22

Comment, page 23