Saturday, 26 October 2013

What was the point of privatisation?

There have been some shifty reactions to the 8-10% rise in utility charges so far announced by three of the largest suppliers. Labour's leaders responded with a promise to freeze prices temporarily if they come to power in 2015 - a promise of Elastoplast in the future, but no long-term solution. Ed Miliband claimed that energy prices went down while he was at the relevant Department (I believe this coincided with a fall in the wholesale price of gas across Europe) but otherwise stayed stumm about the years between 1997 and 2010. Sir John Major, in a move which seemed more calculated to undermine Iain Duncan Smith and David Cameron than to help the hard-pressed citizen, proposed the same sort of windfall tax which Labour implemented in 1997 and which he had campaigned against when he had been the defending prime minister. David Cameron himself blamed "green" levies as much as wholesale prices, ignoring the fact that the infrastructure companies came second in the order of components of consumer bills showing an increase.

One would have expected a ringing endorsement of the market, a declaration that no matter how high the cost of supplying gas and electricity by the Big Six appeared to be, it would have been far worse if the utilities had still been in state hands. So I thought I would check back through Hansard to see if that was indeed the rationale for privatisation of electricity supply.

In fact Nicholas Ridley, when opening the Second Reading debate, put wider share ownership at the top of the benefits of privatisation. Next came "the opportunity to develop commercially and to be truly accountable both to its customers and to its shareholders."

It was in fact Malcolm Bruce for the Liberal Democrats who envisaged financial benefits to the consumer:
The way in which electricity currently operates cannot be defended. It uses its statutory requirement to keep the lights on as an excuse for wasteful investment and inefficiency. Despite the Department of Energy's aim of a 20 per cent. energy saving during National Energy Efficiency Year, electricity consumption increased. None of the targets for the electricity industry set by the Department of Energy has been achieved. The industry's response to rising demand has not been to promote energy conservation and efficiency but to build massive new power stations of questionable economic efficiency which are incompatible with the development of combined heat and power as the most efficient form of power generation. I do not defend the present structure and organisation of the electricity industry.

But he did go on to say:
The industry must be strongly and effectively regulated by an agency with teeth — teeth to intervene on and control prices and to require that greater attention be paid to energy efficiency and choice. After four years more of this Government so many utilities will be in the private sector that it might be appropriate to draw the agencies together so that they can pool resources and learn from experience.
I spent time in the United States last year finding out how public utilities operate there. I was impressed by the way that public utilities commissions operate. Without exception, amazement was expressed, by Republicans as well as Democrats, that the British Government should privatise utilities as central monopolies without real competition or adequate regulation. I remain convinced that we shall have to put that right. We also need some kind of anti-trust powers so that monopolies can be examined and be broken up to enforce competition. Because of the Government's record and the sweeping terms of the Bill, we need more detail of Government thinking before the House can be expected to support the Bill.
An open-minded approach to the privatisation of electricity might yield useful answers to the problems that British Gas and British Telecom are now manifesting. We should improve the operation and accountability by the electricity industry

Dr John Cunningham virtually committed Labour to renationalising electricity and bringing back the water boards. What happened to that, then?

Me? I've switched my electricity supply to Good Energy. I believe they are wrong in turning their backs on nuclear power as a non-carbon source of electricity, but they seem to be straightforward people to deal with - and they have promised not to put up their prices in the current round.

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