This paper examines recent developments in U.K. utility regulation from a business ethics perspective. The regulatory framework that facilitated privatisation of the utility companies has foundations based upon free market principles involving a transfer from regulation to competitive markets wherever possible. Where competition is not feasible, continuing economic regulation is relied upon, designed to mirror the competitive market to induce, through comparative competition and the price capping mechanism, incentives for greater efficiency. The New Labour Government, having fundamentally reviewed this framework (...) when it came to office, has surprisingly endorsed its basic tenets. However, it wishes to superimpose social responsibility regulations designed to achieve social policy rather than economic objectives. This interventionist approach is in itself in conflict with the free market inspired regulatory framework but additionally, the imposition of social policy objectives creates fundamental ambiguities within the framework for the key stakeholders. The paper concludes that the Government''s policy, by eliciting stakeholder confusion and perverse behaviour, could be counter-productive but that ethical theories and frameworks can contribute to thinking in this vital area of the economy. (shrink)