Electricity – public or private? Does it Matter? Is it even the right question?

by Kayt Button

ICR Byatt, an economist who went on to advise The Treasury under Margaret Thatcher and held a number of posts related to public utilities and regulation wrote in his The British Electrical Industry 1875 to 1914 “electric lighting and electric tramways became commercially feasible at a time when Parliament was experimenting with methods of public utility regulation, and when the municipal trading movement was gaining ground rapidly. By 1880 the old idea that utilities could be regulated by competition was over; the 1870 Tramways Act had inaugurated the system of granting limited-period franchises; the big towns had begun to buy up gasworks and waterworks”.[1]

Yet nearly 40 years after this was published government policy continues to increase regulation in a competitive market. Jeremy Corbyn has recently suggested that national ownership is something he would like to see and got a mixed reception from those across the sector. Maybe the ownership models of electricity companies over the last 150 years can “shed some light”.

The first pioneers, private individuals who were passionate about electricity, were convinced it was the fuel for the future. The industry that evolved was parochial, and by the early 1920s there were, according to the Weir Report of 1925, 572 authorised electrical suppliers running 438 generating stations. In practice, many suppliers were providing different types of electricity, current, voltage and the frequency of the supply could all vary making any attempts to integrate the system impossible, even if theoretically all the suppliers could agree to it. In Greater London alone there were 70 authorities supplying the public, with 70 generating stations, 50 different systems, 10 different frequencies, and 24 different voltages.

In 1926, Stanley Baldwin announced the construction of the National Grid. This new infrastructure was imposed over the existing electricity system with the intention of standardising electricity, making it more accessible, and reducing its costs. All suppliers would distribute electricity but only fifty companies would generate it, and in larger quantities. The grid would purchase power from these fifty suppliers and then sell it to all the distributors. It was thought this would create a market where uneconomic distributors would leave the industry and result in a more streamlined system. However, nearly all distributors continued to be economically viable and indeed quite profitable. Eventually, in 1947, nationalisation of the whole industry was announced and all interests were vested. Another approach to try to meet the same goals of an accessible, reliable, affordable public service.

However, the decision was taken in 1990 to privatise to make electricity a more competitive market striving for low prices and improved service through ever increasing regulation, despite Byatts assertion that “By 1880 the old idea that utilities could be regulated by competition was over”

In the words of George Bernard Shaw “Hegel was right when he said that we learn from history that man can never learn anything from history”, or perhaps that Marx was right when he said “History repeats itself, first as tragedy, second as farce”. Public or private ownership definitely hasn’t been fully resolved, and whatever your political persuasion, ownership seems to come from ideology rather than practicality and will change according to a government’s position.

The more fundamental question that needs to be addressed is how the industry can continue to meet demand with a reliable and affordable electricity supply using sustainable fuels, and infrastructure that have little, or ideally, no environmental impact. How can it loose its reliance on fossil fuels and nuclear power and still meet demand? Whilst ownership might be relevant, these are the questions political leaders should be addressing to consider a long term future of a society which is currently so dependent on electrical power.

(Image of the Haven Banks Power Station courtesy of South West Electrical Historical Society www.swehs.co.uk )

[1] Byatt ICR, The electrical supply industry 1875 to 1914

2 thoughts on “Electricity – public or private? Does it Matter? Is it even the right question?

  1. I think that Byatt should not be criticised for saying ““By 1880 the old idea that utilities could be regulated by competition was over”. It has been very clear since denationalisation of the industry that with this, as with other utilities, it is accepted that there are tendencies towards a natural monopoly and competition will never be perfect. This is why in these cases, unlike with supermarkets or cars, we have OFGEM and the other regulators. There are of course big questions about this system (for example, why do the utilities regulators not talk to each other more? is there a tendency for them to become biased simply because they are constantly in discussion with providers and much less often with consumers?); but that is another story.

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