electricity privatization: case of uk

Energy policy Electricity Privatization

UK

10.04.2023 Mikhail Parfentyev

10.04.2023 Mikhail Parfentyev 2

Structure

• Conditions• Case of UK electricity• Semi-conclusions• Privatization path• Conclusion• References


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


World map

10.04.2023 5

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


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


Transition

Natural monopoly Natural monopoly sectors

Competitive sectors

• Production• Marketing

• Transmission• Dispatch

• Transmission• Dispatch

• Production• Marketing


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


(Pollitt and Neberry, 1997)


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


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


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


Conclusion


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.


CEGB

National Grid Company

National Power

electricity privatization: case of uk

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