Introduction Since the privatisation of the British electricity industry in the early 1990's the power industry has gone through major structural changes. As with most privatisation of former public companies, (such as the privatisation of British Telecom and British Gas), the government wished to see increased efficiency in the production of electricity.
By privatising, the government hoped that the incentive of higher profits would act as a reward for efficiency, meaning that more effort would be made in research and development of new techniques so as to make production more efficient. In order to pass savings onto the consumer, the electricity companies would have to work under certain restrictions imposed by the government and the electricity regulator, (OfGen), which were designed to prevent private monopolies exploiting the consumer.
The aim of this project is to investigate to what extent the industry has changed since these changes were implemented and how the price of electricity to consumers has been affected by these changes.
The privatisation of this industry has seen four main stages: Firstly, British Electricity, a government run industry which was effectively a public monopoly ran from the 1960's until the first step to privatisation in 1990. This stage on the road to privatisation was to introduce competition in direct supply for customers with over 1MW in demand (around 5000 sites), thus introducing the idea of competition into the industry, allowing a small proportion of the market to be run to a certain extent by the market mechanism.
In 1994 the threshold level above which competition was allowed was reduced to 100kW which added another 50000 customers to the competitive industry, meaning that approximately half of all demand for electricity was subject to competition.
By 1995 the regional electricity companies were in full existence and were in the position of...