1. Coursework January 2013
Economics and the Business World
1
Economics and the Business World
Course Work Assessment January Start 2013
Task
Write a report addressing the following 3 tasks. Use your word count to reflect
the marks available.
Q1. The UK electricity industry was privatised over twenty years ago. Explain what
privatisation is and describe how the industry was divided into various companies in
three distinct segments(10 marks).
Q.2. Explain the market structure of the retail supply of electricity in the UKand
discuss the impact this has on the performance of Npower and its customers.
Compare this to other market structures (30 marks).
Q3.Through research, evaluate whether the privatisation of the electricity industry in
the UK has been a success.Use a range of academic sources to justify your answer.
You will need to think about this in terms of investors in the companies, customers of
the companies and the Government’s divestment (50 marks).
10 marks awarded for the report structure, grammar, spelling, presentation of
references and bibliography.
The following articles are provided to help you begin your assignment. You will need
to use various other sources.
Privatisation – Media Articles and Market Data
Article 1:
The great British energy rip-off
The "big six" energy firms were last night accused of maintaining a "stranglehold"
over millions of consumers, after new figures showed that they each control more
than two-thirds of the market in different regions across the UK.

2. Coursework January 2013
Economics and the Business World
2
An average of 70 per cent of households across all regions use the same electricity
supplier, with the proportion rising to 85 per cent in some areas, undermining claims
by the Government and Ofgem, the regulator, that the energy market is operating
competitively.
The official figures show that companies supplying electricity to homes where they
inherited the network from the former utility boards are operating a near monopoly,
making a mockery of the idea that customers routinely switch firms to get better
deals.
Separate data from the Department for Energy and Climate Change (DECC) reveals
that customers who have stayed with their old electricity supplier are paying more
than those who have switched. DECC analysis shows that these "home suppliers"
charge an average of £31 a year more than non-home suppliers for electricity – in
effect placing a premium on loyalty.
The research emerged on the eve of British Energy Saving Week amid an outcry
that energy firms are pushing up fuel bills beyond the rate of inflation, adding
between £80 and £112 to the average annual household bill.
Although deregulation of the energy market in the 1980s supposedly led to more
competition, the reality is more similar to a monopoly within each region of the UK.
The largest five electricity suppliers dominate the regions they inherited from utility
boards more than two decades ago. This is despite consumers being encouraged by
price comparison websites to shop around for the cheapest supplier. When the gas
and electricity networks were first privatised, price caps were in operation, but a
decade ago Ofgem removed controls because competition had, in theory, been
established.
Yet figures published in Parliament in a written answer to the shadow Energy
Secretary, Caroline Flint, show that there is little real competition. Firms last night
claimed the figures show the loyalty of customers they inherited from the boards, but
Ms Flint said the companies appear to be exploiting consumers' unwillingness to
shop around. With a baffling array of more than 500 tariffs on offer, consumers are
often loath to switch.
In Northern Scotland, SSE, the firm that inherited the network from the North of
Scotland Hydro Board, has retained an 85 per cent share of the retail electricity
market, while in south Wales, SSE has an 82 per cent share and in the Southern
region it has an 80 per cent share.
Scottish Power has an 82 per cent share in southern Scotland, and a 73 per cent
share in north Wales. EDF has remained dominant in London with a 74 per cent
share; in the South-east, it supplies electricity to 73 per cent of homes; and in the
South-west, it has 71 per cent.

3. Coursework January 2013
Economics and the Business World
3
Npower remains the dominant supplier in the West Midlands, with 65 per cent of the
retail market; in Yorkshire, it has a 65 per cent share; and in the North-east, 64 per
cent. E.ON has a 69 per cent share in the East Midlands; 68 per cent in the Eastern
region; and 67 per cent in the North-west.
Extracts from the Independent online. October 2013
http://www.independent.co.uk/news/uk/politics/ios-investigation-the-great-british-
energy-ripoff-8219565.html
Article 2:
Why privatisation has been a success story
Why has such an obviously attractive and rewarding policy resulted in such an
overpowering popular backlash? The problem is that along with the cure,
privatisation can have some very unappealing side-effects, particularly in its early
years. These have been most apparent in the last three of the Government's big
privatisations - water, electricity and rail - but they were also there in the early years
of British Telecom, now seen as a triumph of privatisation.
Would the situation have been any better had these industries not been privatised?
The answer is almost certainly no. There would, it is true, be no excessive profits or
pay packets, or fabulous returns for shareholders. But, equally, nothing would have
changed. These companies would have remained bloated and inefficient enterprises,
and despite their public ownership, largely unaccountable for their failings.
The fact that regulators have perhaps not been as harsh as they should have been
at the time is a failure in regulation, but it doesn't mean that the whole system of
regulation is wrong. Certainly there is a powerful case for reform of the institutions of
regulation - more accountability, greater transparency and the like.
By attempting to remove some of the more unpalatable effects of privatisation.(they)
will also be destroying the radical, reforming aspects of the process, to the ultimate
detriment not just of shareholders, but of customers, too.
Extracts from the Independent Online January 1997.
http://www.independent.co.uk/news/business/why-privatisation-has-been-a-success-
story-1281602.html

4. Coursework January 2013
Economics and the Business World
4
Further information:
UK Retail Market Supply
Retail Electricity
Suppliers % Market Share
EDF 20
SSE 18
Npower 16
British Gas 15
E.ON 16
Scottish Power 8
Total 93
Source: www.newpowerconsulting.com, August 2011, 2010/2011 data
Guidance and requirements
Total marks available are 100.
The report should contain no more than 1,500 words and have your information
sources clearly referenced using the Harvard Reference System.
Please make sure your report follows a clear and logical pattern, with an
introduction, analysis and conclusion.
You should be looking to include several pieces of research to support the success
or failure of the UK electricity privatisation.
This task requires you to conduct independent research, using a wide variety
of referenced quality sources.
The evaluation in Q1 requires a two sided argument that results in your views with
recommendations.
You may place the more detailed aspects of your analysis in the appendices, which
should be a maximum of 4 pages. Headings and subtitles, any references, your
bibliography and appendices are not included in your word count. Please refer to the
library guide to help you avoid bad academic practice.
Plagiarism or collusion can lead to your removal from the University.

5. Coursework January 2013
Economics and the Business World
5
Your report is an opportunity to demonstrate your understanding of the theory and
concepts you have been learning during your Economics in the Business World
course. If you do not refer to any relevant economic theory you are not answering
the question.
Additional guidance
For Question 1:
For a score of 40-59%, you are expected to give a basic explanation of privatisation.
For a score of 60- and above you are expected to give a detailedexplanation of
privatisation.
For Question 2:
For a score of 40-49%, you are expected to detail the right market structure and
giving a basic explanation of the characteristics of that market structure in
comparison to other market structures will obtain a basic pass.
For a score of 50-59%, you are expected to detail the correct market structure and
how this impacts on the business and customers. You will compare this against other
market structures.
For a score of 60-69% you are expected to detail the correct market structure and
give a detailed analysis of the impact on the business and its customers. You will
compare this against other market structures.
For a score of 70% and above you are expected to detail the correct market
structure and give a comprehensive analysis of the impact on the business and its
customers. You will compare this against other market structures.
For Question 3:
For a score of 40-49%, you will detail a limited amount of research and applying
them to the privatisation of the UK electricity industry. There is limited analysis.
For a score of 50-59%, you will detail research and apply them to the privatisation of
the UK electricity industry. There is an evaluation, logical conclusionsare made.
For a score of 60-69% you willdetail a well researched selection of factors and apply
them to the privatisation of the UK electricity industry. There will be good quality
evaluation and clear conclusionsare made.

6. Coursework January 2013
Economics and the Business World
6
For a score of 70% and above you willhave an extensively researched selection of
factors and apply them to the privatisation of the UK electricity industry. There will be
a good quality and original evaluation and conclusions.
Marking Scheme
Section Content Marks
Questions
1.The UK electricity industry
was privatised over twenty
years ago. Explain what
privatisation is and describe
how this industry was
divided into various
companies in three distinct
segments (5 marks).
- Explain privatisation
- Explain the three segments
4
6
Max 10
2. Explain the market
structure of the retail supply
of electricity in the UK and
discuss the impact this has
on the performance of
Npower and its customers.
Compare this to other
market structures (30
marks).
- Identification of the market structure
- Description of key characteristics of that
market structure
- Explain implications for NPower
- Explain implications for customers
- Compare to other market structures
-Is this market working efficiently?
For more details refer to the guidance for
Question 2 outlined previously
2
5
5
5
5
8
Max 30

7. Coursework January 2013
Economics and the Business World
7
3.Through research evaluate
whether the privatisation of
the electricity industry in the
UK has been a success.
- Produce researched evidence to suggest
UK electricity privatisation has been a
success or not
-Produce an evaluation of your research
25
25
Max 50
Structure, referencing, use
of language including use
of Harvard Referencing
System
Max 10

8. Coursework January 2013
Economics and the Business World
8
<<thebritish electric industry in 1992 and 2010 ,the rise and demise of
competition >> -----davidnewbery ,university of Cambridge .january in 2011
New electricity trading arrangement
Competitive retail market
Clash of interest :miners------captive market for coal.
Gas producer------increase demand -----price down
Entry of companies .
Privatisation----become more productivity and efficient
Market structure in retailing