Select Committee on Constitution Minutes of Evidence

Annex 3


Water (3)

  Mid-Kent Water (Feb-Aug 2000)—under Water Industry Act 1991 sections 12 (price determination) and 14 (disputed licence).

    —  Determination of K—overall effect over five years of reduction of 15.3 per cent in prices, as opposed to Director General of Water Services (DGWS)'s proposed reduction of 19.5 per cent.

    —  Divergence from views of DGWS and Mid Kent on issues involved determining K.

    —  Recommendation for licence modification.

  Sutton and East Surrey Water (Feb-Aug 2000)—under Water Industry Act 1991 sections 12 and 14.

    —  Determination of K—overall effect over five years of reduction of 13.5 per cent in prices, as opposed to Director General's proposed reduction of—21.3

    —  Divergence from views of DGWS and Sutton and East Surrey on issues involved determining K.

    —  Recommendation for licence modification.

  Vivendi Water UK Plc and First Aqua (May-Sept 2002)—merger referred under Water Industry Act 1991.

    —  Merger rejected—divestment of Vivendi Water's 31.4 per cent stake in South Staffs Group to secure the latter's independence as a comparator; and the DGWS to be vigilant in monitoring the performance of Southern Water Services Limited. Dissenting view that sale of Three Valleys should also be required.

    —  Minister decided not to accept majority view on remedies—asked DGWS to discuss with Vivendi the creation of a new water company (Hampshire Water), and the expansion of Folkestone and Dover water services to include part of Southern Water's existing region.

Airports (2)

  BAA (Feb-Oct 2002)—quinquennial review under Airports Act 1986.

  Manchester (Feb-Oct 2002).

    —  In both—found against the public interest.

    —  Detailed recommendations.

    —  CAA diverged from CC recommendations on some points, but

    —  BAA: broad agreement on cost of capital, clawback of capital overspend in current year five review arising from delays in planning permission for Terminal 5 and providing rebates for users if certain quality services not achieved.

    —  Manchester: CAA decided price cap of RPI—5 per cent not 8.9 per cent recommended by CC, some other modifications of CC recommendations.

Electricity (1)

  AES and British Energy (May-Dec 2000)—licence modification under Electricity Act 1989.

    —  Director General of Electricity Services had proposed a licence modification to include a condition prohibiting conduct which amounts to an abuse of a position of substantial market power. This was accepted by six generator groups, but not AES and British Energy, so the matter was referred to the Competition Commission.

    —  The CC found the unmodified licences were not against the public interest—it recommended no modifications to licence applying to determination of wholesale electricity prices, did not identify ways in which AES and British Energy were likely to be able to abuse a position of market power.

    —  Ofgem accepted the findings but was deeply disappointed as it would have to withdraw the market abuse licence condition from all generators.

Gas (1)

  Centrica/Dynegy Storage (merger)—Feb-June 03 (in progress).

Telecoms (3)

  Cellnet and Vodafone (Mar-Dec 98)—under Telecommunications Act 1984.

  BT (Cellnet and Vodafone (Mar-Dec 98).

    —  Against the public interest—BT's retention on fixed-to-mobile calls to Cellnet and Vodafone networks higher than could be justified. Recommended modifications in BT's licence.

    —  DGT announced intention to implement fully the recommendations of the MMC.

  Vodafone, O2, Orange, and T-Mobile (Jan 2002-Feb 2003)—under Telecommunications Act 1984.

    —  Against public interest: concluded that termination charges in 2002-03 were 30 to 40 per cent in excess of the CC's estimation of the fair charge; and may be up to double the level of the fair charge by 2005-06.

    —  Oftel accepted CC's findings, in particular the CC's suggestion of a one-off cut by 15 July 2003. It said arrangements for the control of termination charges after July 2003 would be considered in the market review to be undertaken by Oftel under the requirements of the new European Directives.

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