The Restructuring and Privatization of the U.K. Electricity Supply-Was It Worth It?
Author: David M. Newbery and Michael G. Pollitt Date: 9/1/1997 (PDF, 200KB)
David M. Newbery and Michael G. Pollitt report on a study that assesses the costs and benefits of the restructuring and privatization of the electricity supply sector in England and Wales. Since privatization, real unit costs have fallen by about 50 percent and real pool prices by 20 percent, and a switch from coal to gas has contributed to a drop in polluting emissions. But some of the positive changes can be attributed to external factors, such as the development of high-efficiency combined cycle turbines and the fall in coal prices. So the authors estimate the net benefits of privatization over the period 1995-2010 by comparing the historical and projected path of the privatized industry with what might have happened had the assets stayed under public ownership. They estimate the overall net benefits from privatization at £11.9 billion. Costs fall, but much of the benefit goes to the generators-because prices in the wholesale market fall much less. The authors suggest that more competition may help to reduce these prices.