The joint commission follows a recommendation from the Better Regulation Task Force (BRTF) that appeal mechanisms should be explored in greater depth. In its report on economic regulators (July 2001), the Task Force said that the appeal rights of regulated companies were inadequate and appeared to lack the balance of other legal procedures. It noted that 'None of our stakeholders was happy with the current system'.

Currently, challenges to regulators can be mounted only by referring to the Competition Commission or through judicial review. But in most cases neither option is viable. A Competition Commission reference is sometimes described as the ‘nuclear option’ because of the prohibitive costs, especially in management time. On the other hand, judicial review can be used only to challenge the regulators on very limited grounds such as failure to observe due process.

The BRTF itself has not put forward solutions. 'The exact nature of the improvement…. needs to be considered in depth,' it said.

The government responded to the BRTF report in February this year; it said it would keep the issue of appeals mechanisms under review and consider the case for improvement.

OXERA and Norton Rose will be producing a report on their findings by the end of May and the sponsors will be seeking to consult the BRTF and the Government on them.

For more information please contact:

Chris Bolt, Group Director, Regulation and Public Policy, Lattice Group

Jim Willison, Media Relations, Lattice Group

020 7389 3213

Notes

1) Water UK represents UK water and wastewater service providers at national and European level. The Electricity Association represents the interests of electricity generation, transmission, distribution and supply companies in the UK.

2) Companies may appeal to the Competition Commission against an Ofgem/Ofwat review of prices, if they believe that the outcome is not in the public interest and, in particular, if they believe it fails to finance the outputs and projects they are expected to deliver. However, if they do appeal, the whole price determination must be taken into account: they are not allowed to appeal against specific elements or parts. The effect of this is to discourage many companies from appealing at all, because the need to examine every aspect of the price-setting process is too costly in management time and consultancy fees. Appeals to the Competition Commission against Ofwat proposals for licence modifications present similar problems for companies.