Privatization, competition and regulation in the British Electricity Industry

Summary form only given. This paper describes the thinking that led to the introduction of privatization, competition and regulation into the British electricity industry, and the measures that were taken to bring this about. It discusses the problems that were encountered and the degree of success that has been achieved so far, and also identifies lessons that have been learned and issues that remain to be fully resolved. Briefly, the aim of privatization and competition was to put the customer first, and to give the customer a choice wherever possible. But where this was not possible, regulation of price and quality of supply was necessary. The industry needed to be restructured by breaking up the monopoly generation and transmission company. Competition in generation has steadily increased, including by new entrants. Competition in retail supply, a novel feature, has proved popular and effective. Most large customers now choose a different supplier than the local company. The extension of choice to domestic customers has also proved a success, after much time and cost spent planning and preparing for this. Price caps on transmission and distribution companies, that have monopoly situations, have been effective in encouraging significantly greater efficiency. The net effect of competition and regulation is that, in real terms, prices have fallen to all electricity customers since privatization. Investment in the network has also increased, and quality of service has improved. The number of complaints has fallen.