Utility Regulation: Review (Hansard, 15 October 1997)

§ The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)
My Lords, the Government are pressing ahead with the review which is considering whether changes are required to the existing systems of regulation in telecommunications, electricity, gas and water, against the guiding principles of transparency, consistency, predictability and accountability. We wish to ensure, in as far as we can given the dynamics of these new markets, open and predictable regulation, which is fair to all consumers and to shareholders; and which, at the same time, provides incentives for managers to innovate and improve efficiency. The review will report to Ministers by the end of the year. If Ministers conclude that change should be contemplated, a consultation paper, setting out the options, will be published early next year.

§ Lord Paul
My Lords, I thank my noble friend the Minister for that Answer. I have two further questions for him. First, regarding the report from the London School of Economics, are we sure who will assess the true cost of the regulators? Secondly, there was a wide perception in the previous administration that consumers were not getting a fair deal. Therefore, are we going to give consumers a higher priority?

§ Lord Simon of Highbury
My Lords, the intention is that consumers will be given equal priority with the other interested parties. Perhaps I may use the word "stakeholders" in that context. However, the question of cost must be answered separately. At present there is no statutory duty to assess cost. The crucial issue—and it is one that has been raised by the utilities—is the flow of information required in order to understand both consumers' requirements and those of the utilities. We need first to get the right information base. Then we shall need to discuss whether the costs are appropriate and indeed whether it will be necessary to apply controls.

§ Lord Ezra
My Lords, while it is satisfactory to note that Ministers will be considering the matter by the end of the year, can the noble Lord assure the House that any action required will be quickly taken thereafter because we are talking about very important issues? In particular, can the Minister confirm that among the issues to be considered will be the desirability of 445 bringing the regulation of gas and electricity together in view of the fact that an increasing number of firms are dealing with those two fuels? Further, is the Minister prepared to say whether there will be an attempt to depersonalise the system of regulation by having non-executive directors associated with the regulators?

§ Lord Simon of Highbury
My Lords, as regards the speed of enacting any decisions that are taken to change the system, I can assure the House that we shall take any action as quickly as possible, consistent with a consultation process. As for the question of the gas and electricity regulatory processes being merged, that is indeed one of the key issues now being studied by the report team. It would be premature for me to give an answer to that question at this stage. Finally, I would rather leave the question of non-executive directors to the report team rather than preview it here today.

§ Lord Borrie
My Lords, does my noble friend the Minister agree with me that one of the downsides of the new competitive environment in gas and electricity is that some of the new suppliers are cherry-picking the better-off customers with the result that there is an increasing discrepancy in the price for these basic essentials as between the better-off and the poorer customers? Would it not, therefore, be a good idea to require regulators to have an obligation to protect the disadvantaged customer?

§ Lord Simon of Highbury
Indeed, my Lords; in the creation of the market place we have seen an extraordinary price differential on offer. That is one of the successes of the policy. I should like to point out that my honourable friend the Minister for science, energy and industry has asked the DGES for reports on the practical implications for differential pricing in the electricity market. He is also concerned about the widening gap among gas customers, especially those on prepayment. My honourable friend has also asked the Director-General of Gas Supply to review the situation.