The Era of Privatisation :: Business Management Studies

The Era of Privatisation Introduction It was under the Thatcher government that the era of privatisation started and it was â€Å"the most radical change in the 20th century British politics† (Young, 2001, p. 1). From 1984 to 1991, the telecommunications, gas, water and electricity industries which were under government control, were sold to become privately owned and controlled. The privatisation of the electricity industry occurred in 1990 but had already begun in 1987 with the creation of a programme describing the different tasks involved in privatising the generation, transmission and distribution of electricity. According to Young (2001), the considerable number of privatisations can be explained by the intention of improving the efficiency and a more economic reason concerning the proceeds of the flotation. As far as the case of electricity is concerned, David Parker (1999) argues that the main reason was to promote competition and that all the producers of the four activities (generation, transmission, distribution and supply), could be divided into separate corporations responsible for each activity and open to competition. After the privatisation of the electricity industry, a regulatory office was created, the Office of Electricity Regulation - also known as Offer. The need for regulatory bodies such as Offer can be explained for example by the requirement of preventing unfair competition when several companies work in the same fields or provide customers the same service, or the need to protect the work force. Moreover, as Parker argues it can attract international attention. This essay will firstly attempt to explain the situation of the electricity industry before 1997 and the changes it was subjected to, then it will identify the regulation office responsible for this industry and the role it plays, and finally it will highlight the benefits and the drawbacks of this regulation. I- The situation of the British electricity industry A) A historic review up to 1997 Ø The early days As John Surrey (1996) explains, the Electricity industry existed for about 150 years and it has always required a form of regulation especially when the technology started progressing. The first model of regulation were acts of legislation taken for example after the First World War, in 1926, by the Conservative Government to â€Å"establish the Central Electricity Board as the owner of a national grid† (Surrey, 1996, p. XV). Some of the issues were solved, such as the voltage distribution between the different regions but others remained, like the considerable numbers of suppliers. All these considerations tend to explain the nationalisation of the industry in 1948. Ø Privatisation State control lasted forty years until 1989, however the need to promote competition in generation and in retail electricity supply, and to separate the transmission from the generation, led the Thatcher