 A nasty crack appeared this week in the magnificent edifice of regulation, erected to contain the industries which used to be owned by the British state. At first sight, it looks rather a small crack, soon to be papered over, and posing no big threat to the structure. In reality, the power and position of the regulators has been seriously, perhaps irreparably damaged.
Look carefully, and you can already see the water seeping through the crack, since it is water regulation that has taken the hit. When Ofwat, the industry’s regulator, imposed its final rulings for water pricing over the next five year period, four companies – Northumbrian, Anglian, Yorkshire and Bristol – scuttled off to the Competition and Markets Authority to argue that the permitted rate of return on their capital (which is how these things are stated) was too low. Ofwat had imposed 2.9 per cent, while the companies wanted 3.6 per cent.
