electricity privatization: case of uk
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Energy policy Electricity Privatization
UK
10.04.2023 Mikhail Parfentyev
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Structure
• Conditions• Case of UK electricity• Semi-conclusions• Privatization path• Conclusion• References
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Three set of conditions Distributional effects
Distribution of assetsReturn On Assets – laborReturn On Assets – physical capitalPrices and accessFiscal effects
Privatization steps1. Initial conditions2. The sale event3. The post-privatization political
and economic environments (entry barriers etc.)
Government budgetEconomic growth
Employment InvestmentElectorate
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World map
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Case of UK/Wales
Energy Council (1957)
Central Electricity Board Regional energy management
marketing
distribution networks
Generating capacity
National Transmission Grids
3 Vertically-integrated energy companies
Supervisory control
1947 Central Electricity Generating Board (CEGB)
Ultimate customers
Mikhail Parfentyev
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Public policy objectives
• separation of electric power by activity on individual companies
• elimination of vertical integration;• liberalization of generation;• reform of the regional structure of
distribution and retail supply;• gradual liberalization of retail supply.
From White Paper Privatising Electricity
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Transition
Natural monopoly Natural monopoly sectors
Competitive sectors
• Production• Marketing
• Transmission• Dispatch
• Transmission• Dispatch
• Production• Marketing
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The Central Electricity AuthorityPre-reform status Post-reform status
Central Electricity Authority
• Generating capacity
• National trunk circuits
• Supervisory control
Private generating companies
• National Power• PowerGen• Nuclear Electric
State grid company
• National Grid Company
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(Pollitt and Neberry, 1997)
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1990 1995-96* % Decrease
CO2, mtonnes
188 130 31
SO2, ktonnes 2528 1395 45
NOx, ktonnes 703 403 43
The Environmental Impact of Restructuring and Privatization
*PowerGen calendar year 1995, National Power 1995/6.
Environmental Reports for National Power and PowerGen. Total emissions from thermal station/CEGB generation. Fossil fuel generation = generation by National Power and PowerGen
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Semi-conclusion (1)
Million pounds, in 1997 prices
1987/88 1995/96 %
Gross turnover
8032 9661 + 20,3%
Total cost 6660 5709 - 14,3%Gross profit 1372 3560 + 159,5%CEGB employees
47442 21057 - 55,6%
1990-2000 Consumer price decreased by 22% for individuals and by 39% for small industrial consumers (Hunt, 2002)
The accounts of the CEGB and Successor companies
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Semi-conclusion (2)
• Perfect competition? (Duopoly) • Or Need for government intervention?
Year 1990 2000coal 67% 31%gas 0,5% 39%
Environment vs. Efficiency vs. Labor Market
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Conclusion
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References
• Birdsall N, Nellis J. (2003) Winners and losers: Assessing the Distributional impact of Privatization, World Development Vol. 31, No. 10, pp. 1617-1633;
• Ernst J. (1994) Whose utility? The social impact of public utility privatization and regulation in Britain, Open University Press, 225pp.;
• Hunt S. (2002) Making Competition Work in Electricity, John Wiley&Sons;• Johnson Ch. (1988) Lloyds Bank Annual Review: Privatization and
Ownership, Volume I, Printer Publishers, 194pp.;• Newbery D., Pollitt M. (1997) The Restructuring and Privatization of Britain’s
Cegb – Was It Worth It?, The Journal of Industrial Economics, Vol. 45, No. 3, pp. 269-303.;
• Pond R. (2006) Liberalization, privatization and regulation in the UK electricity sector, Working Lies Research Institute, London Metropolitan University.;
• RAO “UES of Russia” (2003) International experience in the power sector reform. England and Wales.
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CEGB
National Grid Company
National Power