1. Energy policy
Electricity
Privatization
UK
29.11.2012 Mikhail Parfentyev

2. Structure
• Conditions
• Case of UK electricity
• Semi-conclusions
• Privatization path
• Conclusion
• References
29.11.2012 Mikhail Parfentyev 2

3. Three set of conditions
Distributional effects Privatization steps
Distribution of assets 1. Initial conditions
Return On Assets – labor 2. The sale event
Return On Assets – physical capital 3. The post-privatization political
Prices and access and economic environments
Fiscal effects (entry barriers etc.)
Government budget
Economic growth
Employment
Investment
Electorate
29.11.2012 Mikhail Parfentyev 3

4. World map
29.11.2012 Mikhail Parfentyev 4

5. Case of UK/Wales
1947 Central Electricity Generating Board (CEGB)
Energy Council
(1957)
Central Electricity Board Regional energy management Ultimate customers
Generating capacity marketing
National Transmission Grids distribution networks
3 Vertically-integrated
energy companies
Supervisory control
29.11.2012 Mikhail Parfentyev 5

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 Electricity
29.11.2012 Mikhail Parfentyev 6

7. Transition
Natural monopoly Natural monopoly sectors
• Transmission • Transmission
• Dispatch • Dispatch
Competitive sectors
• Production • Production
• Marketing • Marketing
29.11.2012 Mikhail Parfentyev 7

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
Company
29.11.2012 Mikhail Parfentyev 8

9. (Pollitt and Neberry, 1997)
29.11.2012 Mikhail Parfentyev 9

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 PowerGen
29.11.2012 Mikhail Parfentyev 10

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%
employees
1990-2000 Consumer price decreased by 22% for individuals and
by 39% for small industrial consumers (Hunt, 2002)
29.11.2012 Mikhail Parfentyev 11

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. Conclusion
29.11.2012 Mikhail Parfentyev 13

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. CEGB
National Grid Company
National Power
29.11.2012 Mikhail Parfentyev 15