Electricity privatization: case of UK

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Electricity privatization: case of UK

  1. 1. Energy policy ElectricityPrivatization UK29.11.2012 Mikhail Parfentyev
  2. 2. Structure• Conditions• Case of UK electricity• Semi-conclusions• Privatization path• Conclusion• References29.11.2012 Mikhail Parfentyev 2
  3. 3. Three set of conditions Distributional effects Privatization stepsDistribution of assets 1. Initial conditionsReturn On Assets – labor 2. The sale eventReturn On Assets – physical capital 3. The post-privatization politicalPrices and access and economic environmentsFiscal effects (entry barriers etc.) Government budget Economic growth Employment Investment Electorate29.11.2012 Mikhail Parfentyev 3
  4. 4. World map29.11.2012 Mikhail Parfentyev 4
  5. 5. Case of UK/Wales 1947 Central Electricity Generating Board (CEGB) Energy Council (1957)Central Electricity Board Regional energy management Ultimate customersGenerating capacity marketingNational Transmission Grids distribution networks3 Vertically-integratedenergy companiesSupervisory control29.11.2012 Mikhail Parfentyev 5
  6. 6. 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 Electricity29.11.2012 Mikhail Parfentyev 6
  7. 7. Transition Natural monopoly Natural monopoly sectors • Transmission • Transmission • Dispatch • Dispatch Competitive sectors • Production • Production • Marketing • Marketing29.11.2012 Mikhail Parfentyev 7
  8. 8. The Central Electricity Authority Pre-reform status Post-reform status Central Electricity Authority Private generating companies • Generating capacity • National Power • National trunk circuits • PowerGen • Nuclear Electric • Supervisory control State grid company • National Grid Company29.11.2012 Mikhail Parfentyev 8
  9. 9. (Pollitt and Neberry, 1997) 29.11.2012 Mikhail Parfentyev 9
  10. 10. The Environmental Impact of Restructuring and Privatization 1990 1995-96* % Decrease CO2, 188 130 31 mtonnes SO2, ktonnes 2528 1395 45 NOx, ktonnes 703 403 43 *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 PowerGen29.11.2012 Mikhail Parfentyev 10
  11. 11. Semi-conclusion (1) The accounts of the CEGB and Successor companies Million 1987/88 1995/96 % pounds, in 1997 prices Gross 8032 9661 + 20,3% turnover Total cost 6660 5709 - 14,3% Gross profit 1372 3560 + 159,5% CEGB 47442 21057 - 55,6% employees1990-2000 Consumer price decreased by 22% for individuals andby 39% for small industrial consumers (Hunt, 2002)29.11.2012 Mikhail Parfentyev 11
  12. 12. Semi-conclusion (2) Environment vs. Efficiency vs. Labor Market• Perfect competition? (Duopoly)• Or Need for government intervention? Year 1990 2000 coal 67% 31% gas 0,5% 39%29.11.2012 Mikhail Parfentyev 12
  13. 13. Conclusion29.11.2012 Mikhail Parfentyev 13
  14. 14. 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.29.11.2012 Mikhail Parfentyev 14
  15. 15. CEGBNational Grid Company National Power 29.11.2012 Mikhail Parfentyev 15

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