25 Jun Energy privatisation: What’s happened?
Energy since privatisation
Whilst British Gas was privatised in 1986 in the UK, the electricity sector has been privatised in England and Wales from 1948 to the late 1990’s. This is when the supply industry was radically restructured under Margaret Thatcher’s government, where she promised that this would increase efficiency, widen share ownership and generate investment. Instead, it has resulted in a highly politicised and expensive energy market.
Was it worth it?
For the first few years following the change, real prices, profits and costs in the industry rose. Studies that have examined the UK energy market have concluded that electricity prices are 10-20% higher than they would have been without privatisation.
Similarly, Corporate Watch research suggests that each UK household could save £158 a year if energy was publicly owned. Nonetheless, Nigel Hawkins, writer of the Adam Smith Institute report, regarding the sale of electricity, gas and water said that “it is clear that while utility privatisation is not a perfect solution, it is infinitely better than stultifying public sector ownership”.
Public/ private ownership?
A campaign group for public ownership, We Own It, has released a report which provides examples of other countries examples, displaying how private may not always be best.
For example, in Denmark, democratic local co-operatives own the majority of distribution grids, alike in Hamburg, Germany, where the people voted to buy back the city’s grid. This suggests that the incentives behind public ownership of energy often paves the way towards green energy.
Liberalisation, however means that measures have consistently helped to create competition. This, in turn has provided substantial benefits, some including: growth of competition in supply and generation, substantial improvements in efficiency to all consumers plus increased market transparency. Competition has also led to innovation in technology, risk management products, and reductions in real terms to the price of energy for the consumer.
At the outset of the reforms, industrial consumers were the only group of consumers who had the right to choose who supplied their energy. Although, the market has slowly been opening up since the late 90’s so that even residential customers now have the freedom to easily switch between suppliers to find the best deals.