LEADING ARTICLE: Fat cats cry over spilled cream

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Every time you think you have seen the ultimate in utility fat- cat greed and crassness, someone ups the stakes. David Jeffries, chief executive of the National Grid, is insisting on yet another bonus, this time of a mere pounds 200,000. Labour estimates he has picked up pounds 2m inside a year.

Now even government ministers and the only slightly thinner cats who run Seeboard, one of the companies which owns the grid, are crying foul. They can see that the fate of the privatisation process, the reputation of the electricity industry and even the Tories' election chances are all being placed on the line. It is also becoming impossible in this overheated atmosphere for anyone to think and act clearly about the important issue of how to regulate the utilities as the structure of the industry comes under pressure from a wave of mergers.

More immediately, the sale of the National Grid in December raises serious questions about the fairest distribution of the proceeds between consumers, taxpayers and shareholders. When the National Grid is sold off in December, there will be a windfall of up to pounds 5bn. Left to themselves, the electricity companies who own it would simply pass all the cash on to their shareholders. They have to pay capital gains tax and - and after Tim Eggar's announcement yesterday - they will also have to pass pounds 50 back to each consumer, costing about pounds 1.2bn.

The scam is that David Jeffries and his colleagues hold executive shares in the grid, so they are legally entitled to some of the "special dividend" which the grid is transferring to the rest of its owners - the RECs - to cover the tax bill. Let us be clear, this latest pounds 200,000 has nothing to do with National Grid's performance, and it certainly has nothing to do with Mr Jeffries's performance. He was urged by the Government to waive his legal entitlement to the money and he has refused to do so.

It defies belief that Mr Jeffries can be so obtuse. For him to insist upon the inviolability of a legal right, at a time when the public and political clamour for restraint in the industry's behaviour has grown deafening, raises the question of his fitness for office. Utility bosses who cannot understand that they operate in a political as well as a financial marketplace should not be doing the job.

Two things now need to happen. The first is that the windfall from selling the grid needs to be shared out more fairly. Under current plans, electricity shareholders will receive about pounds 2bn of the estimated pounds 4bn available. Taxpayers will get pounds 1bn, and consumers a further pounds 1.2bn. The taxpayer and the consumer should both get more.

As for Mr Jeffries, it may be wondered what, short of a team of wild horses, will keep his hand from the till. If he cannot be restrained by the Energy Minister and his peers in the industry, who can make him listen? In theory, the answer is the shareholders for whom he works. That means, in practice, the financial institutions and pension funds who own most of the shares. It is time for the City to use its muscle.