HC Deb 30 June 1997 vol 297 cc20-1W
Mr. Hanson

To ask the President of the Board of Trade if she will make a statement on regulation of the utilities. [6217]

Mrs. Beckett

I am announcing today an inter-departmental review of the regulation of the utility industries. My aim is for the review to report to Ministers by the end of the year.

The Government's objective for the review is to set a long-term stable framework for utility regulation which is seen as fair by all the interest groups involved, particularly by consumers. Without fairness, there can be no long-term stability. We want the regulatory framework to deliver value, quality and choice to consumers while providing incentives to managers to innovate and improve efficiency. The guiding principles must be transparency, consistency and predictability of regulation.

The terms of reference for the review are to consider whether changes are required to the system of regulation of the utility industries in order to ensure open and predictable regulation, fair to all consumers and to shareholders, and which promotes the Government's objectives for the environment and sustainable development, whilst providing sufficient incentives to managers to innovate, raise standards and improve efficiency.

The review will concentrate on the regulation of gas, electricity, telecommunications and water in the context of the development of competition in the regulated markets, and against the background of general competition law, where we will be legislating in the autumn. It will also consider whether there are lessons to be learnt from this and other regulatory experience, to inform the development of regulatory principles of general applicability.

In short it is time to take stock to see how the existing framework can be updated, modernised and refreshed.

Arms length independence of regulators will be preserved, although after 13 years we need to ensure that the balance between Ministers and regulators is correct. Also, while the review will be examining the formula for determining prices, it will not consider rate of return regulation.

There has been extensive consideration of utility regulation issues. The review will take this into account, together with the conclusions and recommendations recently made to the Public Accounts Committee, the Trade and Industry Select Committee, and the UK Round Table on Sustainable Development. This work has already identified many of the key issues, and provides a helpful and well developed starting point for the review. Any further representations to the review may be made in writing by 5 September.

Ministers will consider advice emerging from the review in the autumn. If changes are contemplated, the Government will consult fully then.