Phoenix Gas "re-opening": Terra Firma tries to escape

Daily Telegraph article reporting that Terra Firma/Kellen is seeking to withdraw its offer for East Surrey Holdings as a result of the regulator NIAER's stance in negotiations about a regulatory settlement for the "mutualisation" of (i.e. removal of private equity investment from) East Surrey's Phoenix Natural Gas network. The latest NIAER statement (PDF, 8 pages) — which was published following the consultation responses to NIAER's May 2005 consultation (PDF, 22 pages) — confirmed that it might re-open the perceived regulatory settlement in light of the apparent premium offered by Terra Firma/Kellen for East Surrey Holdings. The statement emphasised that the discussions in 2004 had not, in NIAER's view, led to any agreement, since nothing was implemented and no decision could have been taken without further public consultation.

The money at stake seems to be well into eight figures. Maybe Douglas McIldoon, the chairman of NIAER, is on his way to make a second major contribution to the law of utility regulation in the UK. Mr McIldoon was head of Ofreg at the time of the dispute over NIE's 1997 network price control which culminated in an NI Court of Appeal judgment (against which the Lords refused leave to appeal) to the effect that the Competition Commission's conclusions from a price control inquiry were binding on the regulator.

Update, 17 October 2005: the panel did not allow the withdrawal of Terra Firma's offer (decision: one-page PDF).

For further information or advice please contact Franck Latrémolière.

Filed under Electricity, Ofreg, Price controls, Water.

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