The British Electric Industry 1990-2010:
The Rise and Demise of Competition

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My involvement with the electric industry began in August 1981 when out of the blue I was invited to become chairman of the London Electricity Consultative Council and a board member of the London Electricity Board. As I got to know the industry I realised that it was politically managed to support expensive deep mined British coal; to support the development of expensive nuclear plants; to provide work for British plant manufacturing companies; was overmanned; and – provided the lights stayed on – was to a degree run for the benefit of the employees rather than its customers. In short, it was inefficient and expensive.

In 1985 I was invited to become Chairman of the Working Group on the Electric Industry of the Centre for Policy Studies, and with the help of Miles Bidwell – then the Head of Economics at the New York Public Service Commission – learned how the New York and the other US power pools functioned, and how they might be transmuted into a real-time spot market. In February 1987 – timed to be before the election – the Centre published my “Privatise Power – Restructuring the Electricity Supply Industry”. I advocated a competitive restructuring of the industry in England & Wales by breaking up the Central Electricity Generating Board (CEGB), which owned the high voltage transmission system and virtually all of generation in England & Wales (59GW of plant), into ten competing generators that would be privatized (but the nuclear power stations should remain in public ownership), and a transmission system operator which would operate a real time spot market. In addition the 12 Area Distribution Boards should be privatised, and medium to large customers should have competitive choice. (I believe Miles Bidwell and I were the first people to advocate a really competitive structure for an electric industry in Britain, if not the world). I argued that the performance of the nationalised electricity supply industry and the nationalised British coal industry, which was dependent upon it, were so poor that privatisation and competition would improve performance.

With the election of a new government in June 1987 Cecil Parkinson was appointed as Secretary of State for Energy, and my competitive ideas found favour with him. A paper I wrote “The Operation of a Power Market” tied in with the thinking of the civil servants and their advisers that it should be possible to break up the CEGB without either increasing costs due to losing the merit order or turning the lights out (as the CEGB claimed).

After the government published its White Paper “Privatising Electricity” in February 1988 I realised that I could turn what had been a political hobby – undermining a public sector monopoly – into a way of earning a living as a consultant in this new field, for “in the country of the blind the one-eyed man is king.” For two decades it has been my intellectual and personal pleasure to work in many countries of Europe, North America, South Africa, Australia, and New Zealand, thus to learn how many systems operate. In the course of this I have met many agreeable people some of whom became my friends.

This book would not have been possible without a Fellowship from The Leverhulme Trust, to whom I am very grateful. My sponsors for the Fellowship were the late Professor John Chesshire, who I and many others miss, Professor David Newbery of Cambridge University and Willy Rickett, who was one of the leading civil service lights of the restructuring and privatisation and ended his civil service career as Director General, Energy in the Department of Energy and Climate Change. Both kindly gave comments on bits of scripting, and Professor Newbery has written the foreword. Next the book would not have been possible without the diligent, competent, speedy, and good humoured work of Jenni Pendry, my PA. Many people helped with information and comments, but none more than Nigel Cornwall who was involved in the privatisation and now runs Energy Spectrum, and is a font of knowledge.

In addition the following helped here and there and some considerably – Liz Anderson, John Ashcroft, Peter Atherton, Roger Barnard, Rob Barnett, John Bower, Simon Bucknall, Derek Bunn, Phil Burns, Dave Cave, Andrew Claxton, Robin Cohen, Brian Count, Rachel Crisp, Martin Crouch, Lewis Dale, Andrew Fawcett, Rachel Fletcher, John France, Mark Friend, Jim Gallaugher, Mike Gibbons, Richard Green, Jonathan Green, David Green, Matthew Harwood, Clive Hawkins, Peter Hickson, Peter Hughes, Paul Hunt, Tarooj Jamasb, David Jefferies, Michael Jefferson, Ian Jones, Jim Keohane, Christella Kyracou, Emma Lawrie, David Lewis, Derek Lickorish, Denis Linford, Stephen Littlechild, Paul Liversidge, David Love, John Macadam, Dominic Maclaine, Hugh McNeal, David Mannering Keith Miller, Richard Morse, Keith Munday, Karsten Neuhoff, Hannah Nixon, Andy Phelps, Paul Plumptre, Michael Pollitt, Alison Porter, Stephen Ramsay, Michael Reidy, Alan Robinson, Joanne Robinson, Paul Rochester, Tim Russell, Brian Senior, Judith Shapiro, Simon Skillings, Steve Smith, Ray Smith, Keith Smith, Goran Strbac, Martin Taylor, Graham Thomas, David Tolley, Richard Tomiak, Mark Turner, Claire Tyler, Tracy Vegro, David Vincent, Judith Ward, Roger Whitcomb, Tony White, Andrew Wood, and Min Zhu.

Thanks are due to Ofgem for permission to use and modify some exhibits. The mistakes are all mine.

Alex Henney
London N6
30 January 2011




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