Sparks fly over electricity and water merger plan

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The Independent Online
Mary Fagan

Industrial Correspondent

The privatised utilities were plunged into fresh controversy yesterday over a proposed pounds 4bn merger of North West Water and Norweb, the regional electricity firm in the North-west, which would create Britain's first mixed-utility company

Consumer groups joined the Labour Party in calling for an early reference to the Monopolies and Mergers Commission after Norweb said it was talking to several parties, including North West, "each of whom has expressed an interest in making an offer".

A fresh bid for a regional electricity company has been expected since the Government last week signalled a free-for-all in the market, deciding not to refer three proposed takeovers to the competition authorities.

The talks emerged as Cedric Brown, the chief executive of British Gas, said his company was looking at the electricity market and refused to say whether he might bid for a regional firm. But Ofgas, the gas industry regulator, would almost certainly oppose British Gas buying another utility because of the concentration of market power.

Unions warned that a merger between North West Water and Norweb would result in heavy job losses in industries which have already seen workforces "cut to the bone" since they were privatised.

Jack Cunningham, shadow trade and industry secretary, said any merger plan should be rigorously examined.

"The consumer interest, effective regulation, and the consequences of monopoly private control of two essential utilities all need to be investigated in the public interest," he said.

Philip Cullum, policy manager at the Consumers' Association, called for an urgent revamp of the utility watchdog system in the light of the proposed merger. "Separate regulation of each industry has failed to keep pace with the changing market," he said.

City sceptical on bid, page 18

Comment, page 19