The electricity industry was better handled. Power generation was split into two main companies, National Power and Power Gen where shares were sold. Nuclear power resided in a third company. A National Grid company was established. 12 regional electricity companies were also sold. The generating system was competitive, with companies having to bid in their power availability. The grid drew power from the next cheapest as demand rose. Privatisation confirmed the dash for gas, as the industry gave up on new large coal fired power stations. Thermal efficiency was much greater and burning gas was much cleaner, providing a good cheaper supply of energy and a big environmental leap forward.
Electricity privatisation
By the time the government got to electricity privatisation the idea of competition was more firmly embedded in plans. The generating side was split into three companies with nuclear forming a fourth that was difficult to sell given the long term liabilities over decommissioning. The regional distribution boards were sold as regional monopolies. It was decided to stagger the introduction of full competition and choice for customers, starting with the largest in 1990 and reaching the retail customers by 1998. We moved from monopoly to consumers being able to choose a supplier in a competitive market.
In a 2000 study of the first decade of privatisation Preetum Domah and Michael Pollitt concluded that consumers paid £4. 2 bn less than under nationalisation, with good price falls coming in the second half of the 1990 s. The government collected £5.1 bn from sales receipts for the businesses and from taxes.
Given the initial monopoly elements retained in regional distribution companies the government imposed a Regulator, Offer. The early price controls were thought to be lax so they were toughened in 1994 and helped bring prices down.
When I had discussed electricity privatisation in advance of the event with the industry I told them I would guesstimate a 20% Labour productivity improvement after privatisation. They assured me they were perfectly productive and could achieve no such gain. I pointed out that was a typical saving from contracting out public sector services. The 2000 study revealed that in practice Labour productivity doubled between 1990 and 1997. When I talked to the industry after the event they teased me for underestimating the improvements they had denied could happen.
When in the early days I queried the industry’s heavy reliance on inefficient large coal power stations they told me the laws of thermodynamics meant they could not progress beyond 32% thermal efficiency. I responded that having read a bit of economics and business history I thought they would find more thermally efficient ways of generating that did not lose two thirds of the energy inputs. As it happened the industry had started experimenting with small gas turbines. The privatised industry went on the dash for gas, capturing more than half the energy burned in a greatly expanded gas fleet.
Rail was complex. I sat on the Ministerial Committee to work up proposals, I favoured the minority proposal to keep track and trains together, to privatise regional companies and licence competition over regional tracks.The proposal adopted created a monopoly track,stations and signals company which did not perform that well. It was renationalised with its successor under government control also performing badly and causing many delays for train operating companies. In the first few years of privatisation the railways went through a renaissance thanks to new ideas and investment by the new train operating companies. . They reversed the decline of passenger numbers and introduced new trains. More recently the Regulators have stifled innovation and taken over control of many fares and of timetables blunting most possible gains from private sector better management.
March 30, 2025
And now look at the mess both electricity generation and the train services are in
Electricity is no longer competitive as the price is set by government mandate. The whole market is rigged in favour of subsidised renewables and we are in a precarious position during high demand.
A worse outcome couldn’t be possible.
Train franchises are a failure again relying on massive subsidies and before largely owned by foreign governments
What started off as a great idea has morphed into a nightmare situation where foreign governments control our infrastructure. British Stee5is the latest glaring example of what happens when you let competitors buy critical industries.
March 30, 2025
IW : “The whole market is rigged in favour of subsidised renewables and we are in a precarious position during high demand.”
The HoC Public Accounts Committee in their Energy Bills Support report HC511 write on P1:
“UK domestic and industrial consumers also face very high electricity prices
compared to many other countries. The Department has not set a timetable
for policy decisions to reduce electricity bills by shifting the cost of levies
onto gas bills.”
Talk about rigging the market!
https://committees.parliament.uk/publications/47200/documents/245104/default/
March 30, 2025
Why on earth do they think that transferring the charges to gas bills will lower energy bills? Because the consumption of electricity would be at a lower direct cost we would consume more, increasing the subsidies paid to renewables.
I read that Miliband secured a further £8bn to add to the £22bn to be spent on the CCS black hole. How even Labour MPs can tolerate such wasteful expenditure in the face of rising taxes and cuts to welfare spending is astonishing. Cabinet approval must surely have been sought for such a sum.
March 30, 2025
Mark the idea is to make gas prohibitively expensive so we go to electricity.
Petrol will be the same above inflation annual rises as well as exorbitant road tax to force us to EVs or off road completely
March 30, 2025
IW :
Correct. In fact smart meter controlled electricity even if the electrical replacement devices are more expensive and unsafe.
March 31, 2025
What happens when they succeed and there is no gas to add a surcharge to?
March 30, 2025
A Train Regulator is meant to control, resulting in the best operation of services.
A regulator that carelessly drops a spanner in the works should be punished for misconduct and replaced with better.
March 30, 2025
Time to abolish or privatise the police.
Half a dozen(!) arrest parents for a WhatsApp comment.
Then another lot break into a Quaker Meeting House and arrest a group of women.
Clearly police are no longer fit for purpose and are a drain on the taxpayer & public finances. People will just have to sort out the real crimes themselves, or pay some genuinely useful group to do it on their behalf.
March 30, 2025
With the greatest respect, Sir John has forgotten to mention our investment in renewables. This morning, wind is generating 15.8 GW, this represents 80% of demand. We are exporting 19% of this electricity to France, the Netherlands, Ireland, Norway and Belgium using the interconnectors, earning income for the Treasury and demonstrating the wisdom of investing in this technology.
Reply Yes, renewables work when the wind blows and the sun shines. Still need to pay extra for the back up power stations for when there is no wind . Solar no good on cold winter evening.
March 30, 2025
And how much do we pay to import energy when the wind is not blowing and the Sun is not shining ? A lot more I would imagine.
Give us the figures over a complete year, not just a single day when suits you.
Very disingenuous.
March 30, 2025
Here you go: full year 2024: 144.7TW ie 50.8% of the UK electricity.
March 30, 2025
How much was imported during the year Hef because we blew up existing capacity?
How overpriced was that 50%
March 30, 2025
assets.publishing.service.gov.uk ‘Energy trends’ 27/03/2025, 37pp
Fig.5.2 About 40TWh of imports.
(Funny that LL had not (yet) intervened, the previous comment was obviously 144.7 TWh).
As for the price you should know by now that it follows the wholesale market. And I’m NOT going to spoon feed people unable to do a google search.
March 30, 2025
And electricity as a percentage of our overall energy requirement?
March 30, 2025
@Mark B – and is it sold at the market rate when the wind is blowing and the sun is shinning? Pull the other one How much are we paying over the going market rate to feed the State Owned Industries that supply us?
Privatisation is about competitive market prices, but apparently not when it comes to energy, the driving force of UK Commerce, then it is about squeezing the maximum from the captive consumer – Oh that’s just Nationalisation, then.
Dress things up in double-speak, imply, use subterfuge – and the consumer is orchestrated by government to pay more. It is being as @Mark B suggests ‘disingenuous’
March 30, 2025
SG. This is probably the first day this year this has happened and we’re charging £30 per mwh. Later in the week we’ll be buying the same electricity back at £129mwh
The economics of the madhouse
On 26 occasions already this year wind has contributed less than 2% of demand at times when we really need power.
March 30, 2025
@Ian Wraggg – is £129mwh the open market rate? or is that the loaded State/Government, Taxpayer/User subsidised rate. The sort of thing that happens in Nationalised Industries but not free market competitive companies
March 30, 2025
That’s what the exporters bid. As we get nearer the red zone it increases.
One day National grid has to pay over £2k per mwh from Belgium.
March 30, 2025
The purpose of the power grid is not to generate occasional, sporadic income for the Treasury, it is to provide consistent power as required to meet our domestic, commercial and industrial needs.
There is no wisdom at play, simply ignorance, egotism and greed.
March 30, 2025
It is true that net power is being exported. Usually when I look we are importing.
But then look at the export price – £10.93/MWh. When National Grid imports, it’s typically at a much higher price, following their policy of buy high, sell low. Earlier on the price was actually negative, so they were dumping excess generation at a loss.
So not much income for the Treasury. It would be much better economy to generate cheaply when demand was high and export that, but renewables (wind and sun) don’t allow that flexibility. For that purpose you need your renewables to be hydro-electric or geothermal.
March 30, 2025
I think the same is true for our neighbour’s solar panels, when they feed into the grid it is at a low price.
March 30, 2025
Typically 9 pence per kwh.
March 30, 2025
SG :
Yes, if you subsidise sufficient renewables you will get some chaotically intermittent power. 15.8 GW from 47 GW installed power from renewables is like saying you can get 40 mph from a push bike – but only when going downhill and says nothing about the average speed over a long journey. NESO’s Clean Power by 2030 requires for an average demand of 33 GW: 50 GW offshore wind, 27 GW onshore wind, 47 GW solar, 35 GW unabated gas, 12 GW interconnectors, 11 GW DSR (rolling blackouts) and 7.8 GW extras (nuclear/biomass/hydrogen/gas with CCS). Although early this morning we were exporting electricity it was at negative prices because negative prices are less of a loss than restraint payments. Furthermore NESO in their report clearly say that by 2030 exports will be at negative prices and imports at positive prices.
March 30, 2025
Yeah. You get one day in a blue moon like that. Generation is £12 per mW TODAY. You getting cheap electricity today?
March 30, 2025
SG :
PS : The AR6 CfD prices for renewables are higher than the current price for gas even when including the environmental levies on gas and never forget that there is no grid-scale storage for when the wind doesn’t blow and the sun doesn’t shine – not even a plan for one. The Royal Society’s “Large-Scale Electricity Storage” plan using hydrogen calculates a doubling of price even though it has very optimistically assumed a doubling of wind capacity factor and electrolyser efficiency by 2050. Furthermore note that all the wind turbines and solar estates built for Clean Power 2030 will need replacement for Net Zero 2050. How can CCC can say that the net cost of Net Zero will be just £5bn/year?
March 30, 2025
SG
If it is that good, why are my bills going up yet AGAIN.?
March 30, 2025
Well renewable “sort of works” when the wind blows and the sun shines and it is fairly warm and daytimes so electrical demand is rather low anyway. Try it in January when freezing and we have all been fored into EV vehices and to use heat-pumps. But remember most energy used circa 80% is not for electricity and much industry has been killed or exported by mad and evil government policies.
March 30, 2025
SG:
DESNZ has recently dropped the idea that the purpose of rewewables is to save the planet, as they know this is not true, and now say that it is to provide energy (price) security. The problem is that their plan still requires unabated gas as there is no plan for any grid-scale storage, or massive rolling blackouts, and instead of the possibility of gas prices spiking because of our low gas reserves coupled with volatile gas markets we will now have permanently high electricity prices.
March 30, 2025
Sorry SG – but its ‘fools gold’. Or as rare as hen’s teeth.
March 30, 2025
Exports are at negative prices today, which perhaps isn’t quite the wonderful deal you think it is, especially since the bills for subsidies for the exports (and the “low” price domestic use of renewables) get paid by UK consumers.
March 30, 2025
SG : “This morning, wind is generating 15.8 GW, this represents 80% of demand.”
Now, at 21:50, it’s 4.48 GW, 14.85% of demand. Solar is of course zero.
March 31, 2025
SG
It is 1100 am and wind is generating 2.48 GW….7.5% of demand
Dream on
March 30, 2025
If I recall correctly the CEGB used estimated replacement costs of its existing facilities and technology when calculating prices charged to customers. This pushed prices up in inflationary periods. I think this was a contributing element to high prices pre de nationalisation. The dash for gas knocked that pricing model on it’s head. Unfortunately we are now lumbered with another state and NGO sponsored phony pricing model because of Net Zero lunacy.
March 30, 2025
However good privatisation may have been, government failed big they failed to create time, in that they achieved energy costs with the same processes as the USA for extraction, that were three to five times higher for the end user. The worst effect of this was to drive high energy using industrry offshore.
They failed to create a national welfare fund from the tax proceeds, a la Norway. A political failure.
Governments final act of driving a stake in the heart of GB Ltd was to invent and apply Nett Zero, handing its implementation to the largest group of incompetent and deluded politicians anyone could imagine. A clusterfuck by definition.
March 30, 2025
The problem we have is that the perpetrators are not held properly to account, lessons are never really learned and so the failures keep being repeated.
March 30, 2025
If you wanted a state welfare fund we would have had either to raise more taxes or borrowed to fund it. Unlike Norway, the government has almost always run a deficit. Given the ability of government to waste money on value destroying “investment”, it is a good thing they didn’t get access to more funds to spend.
March 30, 2025
Correction ” failed to create bigtime”. Finger trouble.
March 30, 2025
Good morning.
Out of all the energy companies created, I wonder how many are still running concerns and, how many are still British owned ? No many I aver.
This is how New Labour got round the thorny issue of State ownership and its Clause 4. Instead of directly controlling, they would just regulate it. And it is all this regulation and associated QUANGO’s that must go.
March 30, 2025
The 1986 Gas Act and 1986 Electricity Act are at the origin of the privatisation. During the ‘90s mergers and acquisitions created six companies: British Gas. E.on, EDF Energy, SSE Energy, Scottish Power. By 2020 they were covering more than 70% of households and companies. OfGem favoured competition and new ‘brands’ were introduced (Octopus, OVO) plus a number of ridiculous (but favoured by the likes of Sir John) traders (not producers) on the wholesale market. Between 07/2021 and 05/2022 29 such ‘trading’ energy companies went bust affecting four million households and giving the overall customers the responsibility to pay a £2.7 bn fallout (via the successive price caps).
As of end of 2024 the Big Six providers are British Gas, Octopus Energy, EDF Energy, E.ON Next, OVO Energy and Scottish Power.
British Gas (Services Ltd) is owned by Centrica: British multinational, LSE: CNA
Octopus Energy Group, British multinational, majority British owned, LSE: ORIT
EDF Energy, subsidiary of French EDF, owned by French state
E.ON Next, E.ON UK, subsidiary of German multinational E.ON SE
OVO, British private company (S.Fitzpatrick + Morgan Stanley + Mayfair Equity + Mitsubishi Co.)
Scottish Power, majority owned by Iberdrola, Spain.
uswitch.com 07/02/2025 ‘Which energy suppliers are British?’
March 31, 2025
OFGEM didn’t really favour competition – they favoured an illusion of competition. In reality, there was probably genuine competition for at least elements of gas supply, with no particular compulsion to buy from one source rather than another or to pay subsidies to the less competitive sources. However, that was not the case for electricity, where all retailers are required to fund renewables subsidies pro rata to their market share, and renewables are granted effective preferential market access despite the true cost inclusive of subsidy and other consequent costs being typically very high. In both cases the cap has operated to act as a price target rather than an incentive to negotiate competitive supply. It has also acted to limit the offering of fixed price deals (since it is itself a short term price fix, though it used to be effectively an annual fix before the energy crisis).
March 30, 2025
Sir John, this information relates to a quarter century ago. What is the position now ?
£4.7 billion saving over 10 years is £0.47 Billion per year. say £ 500,000,000. Also Say the population was 50 Million each person saved £10 on their electricity bill per year on average.
The question is how much are they saving now ? Was this saving then worth the results today ?
If you don’t reinvest to maintain plant and support increased demand to achieve a lower price and pay dividends you lose Heathrow Airport for a day.
Reply the privatised industry has made huge investments in renewables at government command, delivering higher cost less reliable electricity. That is the bad result of government interference.
March 30, 2025
Who owns the privatised electricity industry ? If truly privatised how can the Government make demands on it?
The Net zero madness in any case distorts any argument regarding should utilities be privately owned or tax payer owned. This issue is not private or tax payer owned but keeping Politicians out of either approach.
I think Mrs T tried to have Tax payer owned public utilities by way of using the stock market. It did not work as shares moved from tax payers to Corporations and worst of all Foreign ones at that.
Perhaps rather than shares you could have some type of bond which you could only sell back to state company running the utility keeping politicians out of the decision making.
March 30, 2025
@Reply – ‘privatised industry has made huge investments’ – Government enforced levies and taxes handed over to Private and not so Private (Foreign State owned Industry), creating artificial high pricing over and above the going market rate cannot be conceived as private industry financing. As it is a Government imposition, lets call it what it is ‘Tax’ therefore taxpayer money. No over-site no accountability just Tax
March 30, 2025
Competition doesn’t work because of man’s weakness for greed and profit taking therefore privatisation is in question for most of these large essentials – what the public is looking for is a ‘Fairness’ in price fixing irrespective of whether it’s in privatisation or in nationalisation. The public is not alway’s looking for the lowest prices but they are looking for the Fairest Prices together with some efficiency and feel that they can have a better chance of achieving It with government control. We the public shouldn’t have to be concerned with the prices of everything on a daily basis especially when we it is beyond our control – competition as practised is not working – some people have the wherewithal to follow up others are too old, too sick, in hospital, unable to use the computers and internet to navigate all of this – others
are just too busy with family and work and forget so privatisation wins.
Reply Communism replaces competitive prices. It gives you empty shelves, scarcity and hyperinflation as Venezuela demonstrates.
March 30, 2025
Reply to reply: As if the only choice was between Venezuelan communism and Ayn Rand’s laissez-faire ‘no government’ neoliberal ‘free market’ capitalism. Only rather limited people are still pushing for these 1980s ideas.
March 30, 2025
How odd you bring up Ayn Rand hefner as if she is the only person with a capitalist opinion.
Tell us where she promoted ” no government “
March 30, 2025
Difficult to reconcile this apparently successful privatisation program with today’s reality.
Very high bills and appalling service.
March 30, 2025
MW,
Agreed.
March 30, 2025
Sir John
I would start by suggesting the State/Government should never be involved in the day-to-day running of anything. But there is a point where so-called privatised operations start to consume ‘Taxpayer’ money, then it all falls down.
No taxpayer money should go anywhere where there is no democratic over-site or responsibility attached. While the Chancellor is the ultimate hander away of ‘our’ money therefore the overall responsibility, its logical down the chain there should be a Minister attached to our money being spent on our behalf.
Then the downside, Ed Davey responsible for the Post Office, just failed and Parliament the ones that hold the administration to account just seem to shrug their shoulders and say ‘what-ever’
There is an in-between state that is the slot for national Infrastructure projects, in particular when the taxpayer is still on the hook for any further expenditure or bail outs. That is the State maintains the overall ownership of the fabric, after all it is the taxpayer that funded and created it, not Government. Then the work is carried out by a fixed term Contract with a Minister in charge to measure performance (It fall’s down as with ED Davey, no one in Parliament has experience or the wherewithal)
National Rail, making its own investments? HS2 £80 billion – not accountability or responsibility. How mush as Red Ed pumped into buying Chinese NetZero products and building a grid, how much is the UK Taxpayer funding the Danish & French Governments to keep our lights on – no over-site, no accountability or responsibility. Heathrow 3rd Runway who pays for moving the M25?
Yes. Privatisation is good if that exactly what it is, private companies moving things forward with no involvement of the Taxpayer. But in the UK everything is a half-hearted fudge say one thing and do something different loaded with caveats, double-talk and subterfuge
March 30, 2025
Parliament, its MP’s Government should learn whose Money it is. This Century has seen one interpretation of Socialism after another with no one protecting the payer, the ‘Taxpayer’. The UK with has morphed into a one party Marxist State, now all money is the money that is owned by the Central Command, it is no longer Taxpayer money. The minions have been excluded by the Politburo
March 30, 2025
It’s a shame that Major got his way and split tracks/stations from the running of trains, initially that seemed like a good idea but it didn’t help the concept of local monopolies.
After 1997 labour were determined to show that privatisation didn’t work. It wasn’t obvious at the time but they did manage to sabotage the wins of privatisation to make it less valuable. After all, labour are only interested in having an ever bigger state.
I believe that if a true Thatcher heir had been in power the Tories would have won the ’97 election, and by now we’d have been a very rich successful country.
Then again the EU got in the way, the real reason Mrs Thatcher was knifed in the back. Since that time we have not had a leader to stand up to the EU nor the globalists – they all capitulated.
Over and over again we see right of centre politics are always better, with greater survival potential than any form of remorseless socialism.Socialism is the enemy here.
March 30, 2025
Sir John, now you are looking at all our yesterdays, perhaps you will give us an insight into what prompted the Public Private Partnership debacles? Then maybe tell us how John Prescot became the face of advising unions and councils up and down the country to invest in Islandic banks at guaranteed 7% return. Remember those heady days? Remember how Alister Darling then used tax payer’s money taken from the treasury to repay/guarantee the loses £pound for £pound of those same unions and councils when the inevitable happened to the Islandic banking system.
No talk of a £22billion black hole anywhere back then eh?
March 30, 2025
If something appears to be too good to be true it generally is!
March 30, 2025
No Debate. No Law. Just Mass Surveillance.
Police in Wales showed the way, disregarding any lack of authorisation from Parliament – now we can look forward to these cameras on every street. VERY soon they will be able to tell you where you’ve been and with whom.
The proposed 1984 guide was never as good as this.
March 30, 2025
“Rail was complex”
Not least because the EU was already interfering, as outlined in a comment posted here on October 1 2011:
http://johnredwoodsdiary.com/2011/10/01/new-railway-plan-will-take-two-and-half-years-and-is-found-down-the-sofa/
which concluded with this paragraph:
“In any case, even if the EU is contributing to the formation of transport policy in the UK, it’s far too late to start objecting to that now, a decade after the Commission issued its first ten-year action plan, two decades after Council Directive 91/440/EEC of 29 July 1991 “on the development of the Community’s railways” – that’s like “the Community’s postal services” – and nearly four decades now since Parliament agreed that we would gradually stop running our own country and let a consortium of foreigners do that for us.”
March 30, 2025
When the government decides for a variety of reasons, none valid, which fuel and its source should be utilised to generate our electricity, then the whole process of market operation is a travesty. Originally we used British coal to prop up our coal-mining industry from deep pits which became internationally uncompetitive. Our offshore gas industry is still producing but is being hamstrung by eco-lunacy. We are now importing gas from the USA when we could be getting it from Russia, but our warmongering in Ukraine is far more important than that poor people cannot afford to keep warm in winter and industries are being driven from our shores by the high cost of energy (but we can still make weapons because the taxpayer pays for these).
As to nuclear power, we used to have a lead in this, but Bliar sold off our industry to the French who we now pay to build our power stations using Chinese loans offering them a high guaranteed price for their electricity.
Now we live in a wonderland in which windmills are being subsidised to SavethePlanet™ while the Chinese and Indians are still building coal-fired power stations and churning out far more CO2 than us: repeal the Climate Change Act or continue to see the destruction of our energy using industries.
March 30, 2025
news.sky.com 29/11/2022 ‘China bought out of Sizewell C as UK confirms £700 m stake in nuclear project’.
investmentmonitor.ai 25/05/2022 ‘A history of radioactive decay: who really messed up the UK’s nuclear industry?’.
March 30, 2025
One thing that mystifies me is why Reform think it a good idea to pay out many tens of billions (or more) to part nationalise utilities. They appear to have failed to analyse the problems, which stem from proto-nationalisation and management by the state and supra national organisations through regulators. Thus the EU Water Directives lie at the heart of many of the problems in that industry, mandating avoiding the development of new sources and rationing by price, and also enabling the acquisition of UK assets by EU champions. The energy industry suffers likewise, greatly amplified by the mad political dash to Net Zero under the Paris agreement.
We need to repeal these foreign diktats and restore the role of regulators to acting in consumer and national interests.
March 30, 2025
“Electricity privatisation: We moved from monopoly to consumers being able to choose a supplier in a competitive market. “
It’s now all been undone by the totally false belief that CO2 (natural or anthropogenic), the gas of life, is causing our very mild global warming for which there is absolutely no evidence.