Regulation and the Privatised Electricity Supply Industry

Date01 July 1990
AuthorBlanche Sas
DOIhttp://doi.org/10.1111/j.1468-2230.1990.tb02830.x
Publication Date01 July 1990
LEGISLATION
Regulation and the Privatised Electricity Supply Industry
Blanche
Sas*
Introduction
On March 3 1,
1990
a new structure for the Electricity Supply Industry (ESI) in Great
Britain was established under the Electricity Act 1989, and by the licences issued under
it. This new structure marks a radical departure
from
its predecessor, dominated by public
corporations.
In
England and Wales, under the Electricity Acts 1947 and 1957, the industry
was effectively divided into two distinct spheres of activities: on the one hand, generation
and transmission, which were the responsibility of the Central Electricity Generating Board
(CEGB)’; and on the other hand, distribution and supply, which were the remit of the
twelve Area Boards
.z
The Government had attempted to inject some private competition
into the industry by allowing private generation and
c up ply,^
and, recognising that the
transmission and distribution systems were public monopolies, by allowing third party
access to the CEGB national transmission grid and the local distribution systems under
the Energy Act 1983.4 However, by 1990 only one company had taken advantage of the
opportunity to take a bulk supply of electricity from other than a public corporation.s
The ESI, like other utilities,
is
an essential industry, whose structure is usually a
combination
of
monopoly and non-monopoly elements. It has a number of market and
technical characteristics which give rise to market failures, and to some degree of government
intervention: its transmission and distribution networks are natural monopolies; there is
a lack of cross-elasticity of demand, and it has large and dedicated infrastructure; potentially
there are spatially differentiated prices, and
so
on.6
In the past one could point to some
degree of regulatory failure to achieve control or additional competition.’ It has been
argued that many of the previous inadequacies of the United Kingdom’s ESI could be
attributed not
so
much to the question of ownership, but to the inadequacy of the regulatory
framework within the public sector.* The Government, however, argued during the entire
privatisation debate,9 that in fact it was the integrated structure of generation and trans-
“Lecturer in Petroleum Law, Centre for Petroleum and Mineral Law Studies, University of Dundee. This
article is based
on
the Clydesdale Bank Lecture given by the author
on
February 27, 1989 at the University
of
Glasgow.
In
its revision it has benefited significantly from two subsequent publications: C. Brownlie, ‘Legal
Issues in the Privatisation of the
UK
Electricity Supply Industry’ (Unpublished dissertation, University of Dundee,
1990) and James
Capel,
‘Reshaping the Electricity Supply Industry
in
England and Wales,’ James
Capel,
London,
February
1990.
I
should also like to thank John Cotterel of the Electricity Association for his comments.
1
2
3
4
5
6
Electricity Act 1957,
s
3.
Electricity Act 1941,
ss
1-3.
Energy Act 1983,
Pt
I.
Energy Act 1983,
s
5.
E.
Hammond,
D.
Helm and
D.
Thompson, ‘Competition in Electricity Supply: Has the Energy Act Failed?’
(1986)
Fiscal Studies
Vol 7
No
1,
11.
A. Henney,
Privatise Power: Restructuring the
ESI,
Centre for Policy Studies, Study
No
83 (1987);
A. Sykes and C. Robinson,
Good Ways and Bad Ways to Privarise Electriciiy,
Centre for Policy Studies,
Study
No
87 (1988).
7
Hammond
er
al,
op cit
n
5.
8
G.
Yarrow, ‘Does Ownership Matter’ in C. Veljanovski (ed)
Privarisarion and Cornperition
-
A
Market
Prospectus
(London: IEA, 1989) at pp 68-69.
9
Privatising Elecrricify
Cm 322 (London: HMSO, 1988) at pp 4-5.
The Modern Law Review
53:4 July 1990 0026-7961
485

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